EPFO introduced following facilities during Lockdown period:-

1) Pandemic Advance Facility for Employees’.

2) Pradhan Mantri Garib Kalyan Yojna (PMGKY). (For both Employer and Employees).

3) EPF Statutory rate reduced from 12% to 10% for the wage month of May 2020, June 2020 & July 2020. (For both Employer and Employees).

Due to COVID-19 Global Pandemic & Lockdown, EPFO Introduced Several Pandemic Period Facility for Employees as well as for Employers.

The Hon’ble Prime Minister of India, due to Covid-19 Global Pandemic announced Lockdown from 25th March, 2020 to 14th April 2020, later the Lockdown extended till 03rd May 2020, Now same is extended till 17th May 2020, further extended from 18th May 2020.

EPFO Introduced ‘Pandemic advance facility’ for employees’

The Central Govt. vide notification dated 27th March, 2020 introduced EPF non-refundable advance from the PF Account of Member. PF Member can get non-refundable advance, not exceeding the basic wages and dearness allowances of that member for three months or up to seventy five percent of the amount standing to his credit in the Fund, whichever is less.

This will benefit all the workers registered with EPFO. i.e. (Total of Basic + DA for 3 Months) or (75% amount standing in PF Fund) whichever is less, will get to the Member as Covid-19 Advance.

1) Calculation for ‘Pandemic advance facility for Employees” :

If the Total balance in member’s PF account as on date is ₹ 50,000/- and his monthly Basic wage and Dearness allowance is ₹ 15,000/-

Therefore ₹ 15,000/- (Basic + DA) X 3 Months =45,000/-

75% of balance of ₹ 50,000/- is ₹ 37,500/-

Then the Member is eligible to get Advance of ₹ 37,500/- which is least of two amounts.

2) Calculation for ‘Pandemic advance facility for Employees” :

If the Total balance in member’s PF account as on date is ₹ 50,000/- and his monthly Basic wage and Dearness allowance is ₹ 15,000/-

Therefore ₹ 15,000/- (Basic + DA) X 3 Months =45,000/-

75% of balance of ₹ 50000/- is ₹ 37,500/-

Then the Member is eligible to get Advance of ₹ 37,500/- which is least of two amounts.

Eligibility to file online Advance claim under Covid -19

  1. UAN should be activated.

  2. Verified AADHAR should be linked with UAN.

  3. Bank Account with IFSC should be seeded with UAN.

  4. Mobile number should be seeded with UAN.

  5. Mobile number should be linked with your AADHAR for final submission of online claim.

Note: Fill online Form 31

Pradhan Mantri Garib Kalyan Yojana

The Govt. of India on 26.03.2020 announced ₹ 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana (PMGKY) for the poor to help them fight the battle against Corona Virus Pandemic.

As part of the said package, the Central Govt. proposes to pay 24 percent of the monthly wages into EPF accounts for three months of Wage-earners below Rupees fifteen thousand per month, who are employed in establishments having up to one hundred employees, with 90% or more of such employees earning monthly wages less than ₹ 15000/-.

A Scheme to be implemented by the Govt. of India – PMGKY package for credit of Employee’s & Employer’s share of PF contributions (EE 12% + ER 12 = Total 24% of wages) for March, 2020, April, 2020 and May, 2020.

Overview of the Scheme:

The Govt. of India on 26.03.2020 relief package under Pradhan Mantri Garib Kalyan Yojana (PMGKY) proposes to pay 24 % by Central Government, of the monthly wages into EPF accounts for next three months of Wage-earners below Rupees 15,000/- per month, who are employed in establishments having up to one hundred employees, with 90% or more of such employees earning monthly wages less than ₹ 15000/-.

Validity of Scheme:

The Scheme will be in operation for the wage months- March, 2020, April, 2020 and May 2020. Further the said scheme has been extended from June 2020, July 2020, & August 2020. (Three Months)

Main Objectives of PMGKY Scheme:

➣ To help and support establishments employing up to 100 employees, with 90% or more of such employees earning less than ₹ 15,000/-monthly wages.

➣ the employees contributions (12% of wages) and employers’ contribution (12% of wages), totalling 24% of the monthly wages for the next three months shall be paid by the Central Govt. in the EPF accounts of employees, who are already members of EPF Scheme, 1952, drawing wages less than ₹ 15,000/- per month and in establishments, already covered under the EPF & MP Act, 1952.

Benefit for Employers :

➣ The employers entitle under the said scheme will the benefit of PKGKY

➣ The financial burden will be reduced to the entitled employers as the 12% employers contribution shall be paid by the Central Government.

➣ Will help to stable the employees strength in the establishment.

Benefit for Employees :

➣ As the Employees 12% PF Contribution shall be paid by the Central Government, the employees will get some extra amount in hand, as the Employer will not deduct the 12% PF Contribution from the salary of employee.

➣ No loss of employment.

➣ It is clarified that if any employee is already a registered beneficiary and his/her employer is availing benefits of payment of employer’s share by Central Govt. under PMRPY/PMPRPY 2016, no such benefit in r/o such employee shall be available under Scheme of PMGKY.

Finance Minister Nirmala Sitharaman in her press conference informed about the measures to be taken for the benefit of the members of Employees Provident Fund (EPF). Those earning a basic salary of more than ₹ 15,000 a month will now contribute 10 per cent instead of the mandatory 12 per cent contribution towards the PF for the next 3 months till August 2020. Also, the contribution of the employer will be reduced to 10 per cent from 12 per cent. However, for the Central government employees, the rate of contribution by the employer remains the same.

Procedure to receive reimbursement of benefits under Pradhan Mantri Garib Kalyan

Reimbursement under PMGKY for Establishments which had remitted for March, 2020 before deployment of facility of PMGKY on PF Portal. Employer need to login in on EPF Portal and has to fill under tab of “PMGKY Reimbursement Registration”. Then Employer need to update Form-5A with e-sign or DSC and has to fill the bank details from which the March 2020 due paid, & then has to submit the claim for PMGKY reimbursement.

EPF Statutory Contribution Rates @10% for the Wage Month of May 2020, June 2020 & July 2020

The statutory rate of contribution will be 10% for wage month of May 2020, June 2020 & July 2020.

Revised rate of EPF Contribution announced by the Central Government, Under Atmanirbhar Bharat Package, vide notification dated 18th May, 2020. The Statutory rate of PF Contribution for Employer and Employees has been reduced to 10% (on Basic +DA) from existing rate of 12% for all class of covered establishments under EPF & MP Act 1952, except the establishments like Central and State Public Sector Enterprises or any other establishment owned or controlled by or under control of the Central Government or State Government.

This reduced rate of statutory PF will help to overcome the immediate liquidity crisis to some extent during pandemic situation. The reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take home pay due to this reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees.

Rate is also not applicable to establishments eligible for Pradhan Mantri Garib Kalyan Yojna (PMGKY) benefits, since the entire employees PF contribution @12% & Employers PF Contribution @ 12% both totalling to 24% of the monthly wages is being contributed by the Central Government. But the establishment availing benefit of Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) can contribute at this reduced rate. Also, the reduced rate is applicable to exempted establishments. But, the establishment which are already paying at @10% are not eligible for any more reduction in rate of contribution.

If the establishment is not able to pay dues timely during the scheme period, then also such establishments is still eligible for reduced rate of contribution, irrespective of date of payment. There is no change in the EPF administrative charges and EDLI contributions both payable by employers.

Due date for payment of Provident Fund extended – due to Covid-19

➣ The due date for filling Electronic Challan cum Return (ECR) for wage month March 2020 is extended up to 15th May 2020 for employers who have paid wages to their employees for March 2020.

➣ Extended time limit is applicable to contributions and administrative charges due for the month of March, 2020.

➣ There would be no interest and penalty, if they remit on or before 15th May 2020. as per circular reference : F. No. C-1/Misc./2019-2020/Vol. II/Part/9, Dated 15th April, 2020

➣ EPFO has decided not to impose any penalty for delay in payment of employees’ provident fund contributions by firms during the nationwide lockdown. As per Circular dated 15 May 2020 Reference No.: C-I/Misc./2020-21/Vol.I/1112. Subject: Relief to establishments and factories covered under EPF and MP Act, 1952 from levy of penal damages for delay in deposit of dues during Lockdown to prevent COVID-19.

Posted in May.

Inter state/intra state supply under GST

Query 1

A buyer registered outside Maharashtra has purchased goods from a supplier in Maharashtra on ex-depot basis. Whether such supply by Maharashtra supplier will be an inter-state supply or intra-state supply?


The supply of goods is the taxable event under GST. However, as we know there is dual system of levy in the form of Inter-state supply and Intra-state supply under GST. In case of Inter-state supply of goods, the Central Government levies IGST and in case of Intra-state supply of goods, the Central Government levies CGST and State Government levies SGST. Therefore, determining nature of supply as intra state or inter state supply is necessary to discharge correct tax liability. Further, the said determination is even more important because, if a person wrongly pays IGST instead of CGST + SGST, the law requires to pay CGST + SGST and claim refund of the IGST wrongly paid and vice versa. Thus, wrong payment of IGST or CGST + SGST can result in blockage of working capital and will require to follow refund procedure.

Article 286 provides that Parliament may, by law, formulate the principles for determining when a supply of goods, or of services, or both takes place:

  • in the course of interstate trade or commerce; or

  • outside the state; or

  • in the course of import of the goods or services or both into, or export of the goods or services or both out of, the territory of India

Accordingly, the Parliament has enacted Integrated Goods and Services Tax Act, 2017 (“IGST Act”) which defines the principles for determining supply of goods and/or services in the course of inter-state trade or commerce, and also in the course of intra-state trade or commerce. The IGST Act also defines when a supply of goods and/or services will in the course of export and import.

Section 7 of the IGST Act defines what is an Inter-State supply and Section 8 of the IGST Act determines what is an Intra-State Supply. On perusal of said definitions, it can be concluded that there are two important variables to determine whether a particular transaction of supply is an Inter-state supply or an Intra-state Supply:

Variable 1: Location of the Supplier

Variable 2: Place of Supply

When both the above variables are in two different States, then the said supply will classify as Inter-State supply.

When both the above variables are present in the same State, then the said supply will classify as Intra-State supply.

Now for the purpose of present question i.e. how to determine the inter-state or intra-state nature of supply of goods, we are only concerned with supply of goods and hence there is no necessity to refer to the provisions relating to supply of services. As discussed above, for the purpose of determining the nature of supply for goods, the two variables required would be the location of the supplier of goods and the place of supply of goods. In the present query the supplier is in Maharashtra, so location of supplier is in Maharashtra.

Place of supply of goods:

The other variable for determining the nature of the supply of goods, is the place of supply of goods. The Place of supply of goods is defined under Section 10 and Section 11 of the IGST Act.

Section 10 of the IGST Act defines the Place of Supply of goods for domestic transactions. The said Section 10 of IGST Act is reproduced below for ready reference:

  1. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

(c) where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

(d) where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

(e) where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

(2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

The principle laid down in section 10(1)(a) is that, if the goods involve movement, whether by supplier, recipient or any other person, the place of supply will be the location of goods at the time at which the movement of goods terminates for delivery to recipient. Further, the movement suggests physical movement from location of supplier. For example, if there is constructive delivery by delivery challan, like a supplier transferring ownership in goods lying in his godown by making sale and issues delivery challan which is accepted by the buyer, while goods still remaining in said godown. Here it can be said that no movement is involved in this supply and hence section 10(1)(c) will apply. Obviously the place of supply in such case will be the said godown and it will be intra-state supply.

The issue will arise mainly in relation to section 10(1)(a) i.e. where movement is contemplated either by supplier or recipient or any other person.

Section 10(1)(a) lays down that the place of supply shall be the location where the movement terminates for delivery to recipient.

In case of sale of goods there can be broadly two situations, namely; spot delivery, also referred to as ex-godown delivery or ex-depot delivery etc. and other, the home delivery to buyer, where goods are to be delivered at place of buyer. If the terms about home delivery are clear in contract of sale then the issue becomes easy, in the sense, the location of termination of movement of goods becomes clear.

For example, if Mumbai seller agrees to deliver goods to Pune buyer, the transaction will be intra-state. Equally, if the supplier sells goods to buyer of other state, with home delivery term, than also the issue is clear. It will be inter-state supply without debate.

However, majorly issue will arise if the recipient is from other state and the contract is ex godown or depot delivery. In such case the movement can be said to be terminated for delivery to such recipient at such godown or depot itself. If such position happens then the issue based on address or location of recipient in other state would be, whether it can be considered inter-state supply or, whether based on termination of delivery it becomes intra-state supply? There are divergent views on above issue. One view says the GST is destination based tax system and once the location of buyer is other state, the supply should be considered as inter-state supply irrespective of termination of movement of goods.

The other view can be, as stated above, the termination point. If it is within the State, then irrespective of location of buyer, it will be intra-state supply. In this respect, reference can be made to following Advance Ruling.

Advance Ruling in case of Deputy Conservator of Forest (71 GSTR 429) (Kar).

Relevant portion of the Advance Ruling is reproduced below for ready reference:

“f. Regarding the other issues, the applicant submits that the Karnataka Forest Department disposes by e-auction and e-tender cum auction methods, timbers of various species both, harvested from forests/ plantations as well as confiscated being involved in forest offences. These are disposed through various depots in the State, including Jarakbande Sandal Godown, Bengaluru.

g. In the sales of timber and red sanders that have been taken place since 22nd November, 2017, the department has mentioned in its sale conditions that the point of sale is the Depot and the destination of sale is also the depot. Thus, 9% SGST and 9% CGST is made applicable on sales. It is reasoned by the department that only after a buyer pays all the amounts due towards the lots purchased, is the lot his/ her/ theirs. After the purchase is complete, the buyer is free to request for and transport it to any place, within or outside Karnataka.

h. In case of buyers based in States outside Karnataka, they have represented (particularly the ones of 20th February, 2018 red sanders sale) that the insistence of the forest department on payment of SGST and CGST is wrong. Their contention is that since the material sold/ purchased is being taken to and consumed outside the State of Karnataka, they should be paying 18% IGST under the IGST Act, 2017.

i. In view of the above, the applicant has sought advance ruling.


5.9 Regarding the second question, the activity of the Government Corporation done to the Forest Department is independent of the nature of the activity involved in the growing of trees and hence what applies to the naturally grown trees applies to the trees which are nurtured, managed and protected by the Forest Department.

5.10 Section 10 of the IGST Act which deals with the Place of Supply reads as under

  1. Place of supply of goods other than supply of goods imported into, or exported from India.

(1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,-

  1. where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

  2. ……………………. ;

  3. where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

The contention of the applicant that the department had mentioned in its sale conditions that the point of sale is the depot and the destination of sale is also the depot. It is only after the buyer pays all the amounts due towards the lots purchased, the transfer of property takes place and after the completion of such transfer, the buyer is free to transport it to any place within or outside Karnataka.

5.11 As per the contention of the applicant there is no condition in the sale offer that there must be an interstate movement or local movement of goods and the applicant also submitted that the permit to transport the goods so purchased shall be issued only after the completion of sale and delivery of goods. The persons participating in the auction are aware of the condition that the transfer of title to goods is happening at the depot and they have to take possession of the goods at that place. The supply gets completed the moment the goods are delivered to the purchaser and the purchaser applies and obtains permit from the Forest department later to transport the goods to his place or any place, on which the Forest department has no control or conditions. In view of all the above reasons and specifically since the delivery is given in the place of depot itself, as per section 10, the place of supply is Karnataka.

5.12 Also, as per of sub-section (1) of section 10, the stress is on the words “supply” and “movement of goods”. If the movement of goods is involved within the supply contract then it, then clause (a) is attracted and the place of supply would be the place where the movement of goods terminates for delivery to the recipient. The words clearly say that the there must be termination of movement and delivery to the recipient is a subsequent action. In the pertinent case, it is seen that the goods are delivered to the buyer and the supply transaction is completed. The contract is over the moment the invoice is raised and the payment is made and there is no condition of the movement of goods being an ingredient in the supply contract. The buyer then after clearing the goods and taking possession of goods applies for permit and takes the goods to whichever place he wants. The delivery of the goods happens when the possession of goods is handed over to the supplier and the movement of goods is not a precondition for supply, they both being independent events. There is no breach of contract of supply, if the purchaser, being from outside the state does not actually take the goods to his place outside the state. Hence as per clause (c), the place of supply would be the place of the location of such goods at the time of the delivery to the recipient and hence Karnataka.

5.13 Further, sub-section (1) of section 8 of the Integrated Goods and Services Tax Act, 2017 reads as under –

“(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 intrastate supply”

In the pertinent type of transaction, since the location of the supplier, [Department of Forests, Government of Karnataka is within the state of Karnataka], is Karnataka and the place of supply (as per the conclusion arrived in the preceding paragraphs), is also Karnataka, as per section 8(1) of the IGST Act, 2017, the nature of supply would be an “intra-State supply” within Karnataka State and hence CGST and SGST would be applicable on the transaction and not IGST.

But, if the disclosure of destination is part of the supply contract and the contract makes it mandatory to issue transport permit to the place of such destination, then the place of supply would be the place of termination of movement of such goods and if both the place of supply and location of the supplier is within the same state, then it would amount to an “intra-State supply” and CGST and SGST would be chargeable. If the place of supply and the location of the supplier are in different states, then the transaction would amount to an “inter-State supply” and IGST would be chargeable.”

It can be seen that in this case, irrespective of recipient being registered outside State of Karnataka, the learned AAR has held that the depot delivery transaction is intra-state transaction. In light of above it can be derived that, irrespective of address or place of registration of recipient the nature of transaction will get decided based on place of termination of movement for delivery to buyer.

There can be situation that inspite of delivery to buyer at depot, the buyer undertakes inter state movement to his place in other state in the continuation of the said purchase. In such circumstances the movement will continue and it will terminate in other state, making the supply an inter state supply. But if no such express or implied condition of inter state movement is available in contract it will be intra state supply.

In this respect reference can also be made one more judgment i.e. in case of Lalitha Muraleedharan vs. Range Forest Officer, Marayoor Range, Marayoor, Idukki District and others (71 GSTR 236)(Ker). In the aforesaid case, the issue was about the nature of supply of forest products when the delivery to recipient is at depot. The Petitioner was recipient and SEZ unit. It was insisting for exempted sales being sales to SEZ is a zero rated sales. The Forest Department which is the supplier in that case was objecting that since the goods are delivered at depot itself, it is intra-state sale and hence cannot be covered under Zero Rated supply. The Hon’ble Kerala High Court after examining the facts held in favour of Petitioner. However, the observations of the High Court regarding determination of nature of supply are worth noting for the purpose of present question. The relevant portion of the said observations of the High Court are reproduced below for ready reference:

“14. This Court examines and applies the effect of a few provisions referred to and relied on by the petitioner to contend that contrary to the requirement of payment of 18% tax, the goods can be transported without the burden of duty/tax from Marayoor Depot to Madras SEZ for final utilisation by the petitioner. Treatment of inter-state and international supplies of goods and services is one of the most crucial elements of the design of a Dual GST regime. The approach under GST regime prescribes a set of rules for defining the place of taxation or place of supply. Now a supply is taxable in a given jurisdiction only if the supply is considered to take place in that jurisdiction. The basic principle behind provisions relating to place of supply is that GST is destination based tax. Therefore, tax is finally payable where goods and services are consumed. It is admitted that the supply of goods is to an SEZ Unit.

The supply of goods/services or both to or by a Special Economic Zone developer or a Special Economic Zone Unit as inter-state supply of goods/services in the course of inter state trade or commerce. A reading of Section 7(5) of IGST Act shows thus: Supply of goods or services or both – When the supplier is located in India and the place of supply is outside India it is treated as inter-State trade or commerce. The supply of goods or services or both to or by a SEZ developer or the SEZ unit shall be treated to be a supply of goods in the course of inter- State trade or commerce. Section 7(5) deals with supply to SEZ and treats supply as a supply in the course of inter-State trade or commerce. Section 8(1)4 deals with intra state supply and proviso to Section 8 holds that supply of goods to or by a SEZ developer or SEZ unit shall not be treated as intra state supply. In other words the supplier and the purchaser if is located within the State and goods are supplied to one of them satisfying SEZ supply requirement, such supply is not covered by the meaning of intra state. Section 8 states that 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. The presumption of that transaction being an intra-State sale is effaced by proviso when the supply of goods to or by a SEZ developer or a SEZ unit takes place. In other words, even if the transaction is within the State of Kerala, if the transaction originates from SEZ or terminates in SEZ, still it is not treated as intra-State transaction. Section 7(1) and Section 8(1) operate subject to section 10 of IGST.

  1. Chapter V of IGST Act is captioned as Place of Supply of Goods or Services or Both. The Statute provides for determining what is the place of supply of goods or services or both. According to Section 10(1)5 of IGST Act the place of supply of goods shall be in cases where the supply involves movement of goods whether by the supplier or recipient i.e. recipient of goods, or by any other person, i.e. transport by road/rail etc.; place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery movement of goods terminates for delivery to the recipient.

Section 10(1)(b) to (e) are not applicable and hence are not adverted to. Therefore, from the above, assuming that the goods upon payment of sale price are handed over to petitioner at Marayoor Depot, such delivery of good is for onward movement to Madras SEZ in State of Tamil Nadu. The definition and the substantive provisions in the applicable Statute that is binding between the parties but not the inference respondents 1 and 2 draw on the alleged completed transaction at Marayoor. The place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient. Therefore, as rightly contended by petitioner that the acceptance of delivery of sandal wood logs at Government Forest Department, Marayoor, is not the conclusive circumstance for deciding the place of supply of goods in the present regime of GST. Mr. Kumar does not dispute the circumstance that the petitioner upon completion of other sale conditions receives the sandal wood logs at Marayoor Forest Department depot, and the acknowledgment of goods at Marayoor Forest Department Depot does not result in termination of movement of goods but results in further movement of goods at the hands of recipient to SEZ. So the final destination i.e. SEZ in the case on hand is the supply point. The actual place of supply by plain interpretation of Section 10(1) is within the SEZ in Madras, State of Tamilnadu, but not in State of Kerala. Therefore, the contention of respondents 1 and 2 that supply of goods is completed at Marayoor Forest Department and subject sets is an intra state transaction is unsustainable. The second objection canvassed by respondents 1 and 2 on place of supply is rejected for the above reasons.”

In this case the Hon. high court has analysed the provisions of GST about inter-state /intra-state supply.The observations go to show that in case of depot delivery sale, it can be inter-state supply if movement by recipient is one of conditions of sale. The effect is that, if such condition not proved then it will be intra-state supply.

It appears that the issue again boils down to pre GST era i. e. Sales tax/Vat and CST. As per section 3(a) of CST Act, the sale occasioning inter state movement is inter state sale otherwise local sale. Same position applies under GST as per above rulings. The terms /conditions of contract are relevant to decide the nature of transaction. It will be beneficial if agreement clearly spells out termination of delivery to recipient. In absence of the same it may invite avoidable disputes. The above position is analysed as per section 10(1)(a) and 10(1)(c) where generally one supplier and one recipient are involved. In light of above legal position, the reply to the question is that, it is intra-state supply unless there is condition of continued movement to other State in the transaction. If there is an express / implied condition for inter-state movement of the goods, than it will fall under the category of inter-state supply.

Posted in May.


  1. Printing of Booklets :

Facts : The Applicant, stated to be engaged primarily in the business of printing of Booklets, seeks a ruling on whether the activities undertaken by procuring orders from a foreign buyer to print texts and thereafter deliver them to various places in India is a taxable transaction.

Observations & Findings : The Applicant supplies the composite printing service to the recipient located in India. Such supplies are not, therefore, export of services within the meaning of section 2(6) of the IGST Act, 2017. It is taxable under SI No. 27(i) of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 or SI No. 27 of Notification No. 8/2017 – IT (Rate) dated 28/06/2017.

In its Circular No. 11/11/2017-GST dated 20/10/2017, the CBIC clarifies the treatment of various composite printing contracts. In all these contracts, the recipient provides the content for printing and the printer supplier the physical inputs. All the printed goods are classifiable under Chapters 48 and 49 of the First Schedule to the Customs Tariff Act, 1975 (hereinafter the Tariff Act). The difference, however, lies in the customer contemplating or not of separate rights and use, arising out of the supply of the goods. In the case of printing of books, pamphlets, annual reports, etc., the goods have no better utility than carrying the printed matter. On the other hand, envelopes, letter cards, napkins, wallpaper and the like have separate use as goods apart from carrying the design or logo printed thereon. The service of printing is, therefore, the predominant element in the contracts for printing of books, pamphlets, annual reports etc., whereas, the supply of goods is the dominant nature of the latter category of printing contracts.

Ruling : The Applicant’s supply of the composite printing service is taxable under SI No. 27(i) of Notification No. 11/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1135 – FT dated 28/06/2017) or SI No. 27 of Notification No. 8/2017 -Integrated Tax (Rate) dated 28/06/2017, as the case may be.

[[2020] 115 taxmann.com 130 (AAR-WEST BENGAL) – Swapna Printing Works (P.) Ltd.]

  1. Bus body building service:

Facts : The applicant is engaged in providing services in the area of Transport Solutions, in the field of fabrication and truck body building area, for transport equipments such as Tippers, Trailers and Tankers. The applicant desires to know whether the GST@ 28%, which they were charging, is correct or whether they can charge GST @ 18% in terms of circular No. 52/26/2018-GST dated 09.08.2018 Para and 12.3.

Observations & Findings : The impugned services of the applicant are covered under heading 9988 as manufacturing services on physical inputs (goods) owned by others in terms of SI. No. 26(ii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 initially and subsequently under SI. No. 26(iii) / (iv) respectively, consequent to amendment of the said entry No.26(iv) of the aforesaid Notification. However, the services by way of Job work in relation to bus body building have been carved out of the earlier entry i.e. SL. No. 26(iv) of Notification supra and a separate entry under SI. No. 26 (i) (ic) has been incorporated consequent to amendment of the said notification vide Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019. The impugned services had been taxed at GST (9% CGST & 9% SGST) right from the appointed date i.e. 01.07.2017.

Ruling : 1. Charging of GST 28% (CGST @ 14% + SGST@ 14%) as per Sl.No. 169 of Schedule-IV to the Notification No.1/2017-CT (R) dated 28.06.2017 is correct, if the activity of the applicant is treated as supply of goods, falling under Chapter heading 8707.

  1. The activity of fabrication of body building on Tippers, Trailers, etc, merits classification under SAC 998881, under “Motor vehicle and trailer manufacturing services”, in terms of SI.No.535 of Annexure to Notification No, 11/2017-Central Tax (Rate) dated 28.06.2017.

  2. The applicant can start charging GST 18% (CGST @9% + SGST@9% as per of Notification No. 11/2017-CentraI Tax (Rate) dated 28. 06.2017, as amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 read with explanation provided under Notification No. 26/2019 -CT(R) dated 21.11.2019.

[2020 (1) TMI 791 – AAR, KARNATAKA, – SLN Tech-Fabs (Bengaluru) (P.) Ltd.]

  1. Supply of printed law journals and DVDs of Journal :

Facts : The Applicant is engaged in supply of printed law journals and DVD’s of law journal. They have preferred an Applications seeking Advance Ruling on the following question, Whether the assessee/dealer which publishes law journals in print and sells the same content that is in books in an electronic form in DVD’s/CD’s with a software to search and read it in computers and hand held devices come under the category of E Book, so that it can avail the benefit of Notification No. 13/2018-Central Tax(rate) dated 26.07.2018 which amends the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 in respect of E-book and pay GST @ 5%.

Observations & Findings : Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 provides the applicable rates for various services. As per the Explanation given in the above entry, ₹e-books’ are electronic version of a printed book falling under the tariff item 4901 and supplied online which can be read on a computer or a hand held device, while in the case at hand, the contents supplied in the form of DVD/CD is a software which is used to access content containing the judgments of various fora, case laws Acts, etc which provides for searching using a particular case number/period/act/court or a combination of the above . The DVD/CDs do not contain electronic versions of the journals but an executable software application and therefore do not fall under the explanation of ‘e-book’ given in the said entry. Furthermore, in the case at hand as held in para 6.3 above, the initial supply of DVD/CD [8523] is supply of goods and hence the Notification do not have any application.

Ruling : The supply of DVDs/CDs with The Law Weekly Desktop’ software along with end user license and the supply of access to the on-line database on the applicant’s website are not eligible to avail the benefit of entry at SI. No. 22 of Notification No. 13/2018-C.T.(Rate) dated 26.07.2018 notification dated 26.07.2018.

[2020 (5) TMI 219 – AAR, Tamilnadu – M/s. Law Weekly Journal]


  1. Maintenance charges collected by Resident Welfare Associations :

Facts : The appellant, an association of apartment owners, collects monthly contributions, from owners of apartment in complex which is used by association for purpose of making payments to third parties for providing security service for residential complex, maintenance or upkeep of common area and common facilities like lift, water sump, health and fitness centre, etc.,

The appellant filed an application for Advance Ruling under section 98 of the CGST Act, 2017 and KGST Act,2017 on the following question:

(i) Whether the applicant is liable to pay CGST and SGST on the amount of contribution received from its members?

(ii) If yes, whether it can avail the benefit of Notification No 12/2017 CT(R) dt 28.06.2017 (SI.No. 77) read with Notification No 02/2018 dt 25.01.2018 which provide for exempting from tax, the value of supply upto an amount of Rs. 7500 per month per member?

(iii) lf the answer to (ii) is ‘yes’, whether it is required to restrict its claim of input tax credit?

(iv) Whether the applicant is liable to pay CGST/SGST on amounts which it collects from its members for setting up a corpus fund?

The AAR has given a ruling on the above questions as follows:

(i) The applicant is liable to pay CGST and SGST on the amount of contribution received from its members as their activities amounts to taxable supply of service.

(ii) The benefit of exemption under entry No. 77 of Notification No 12/2017 CT(R) dt 28.06.2017 (as amended by Notification No. 02/2018 dt 25.01.2018), is available to the applicant only if maintenance charges (contributions) do not exceed Rs.7500 per month per member. In case the charges exceed Rs.7500 per month per member, the entire amount is Taxable.

(iii) The applicant is eligible to claim input tax credit on the inward supplies of goods and services and this is subject to the restrictions as enumerated in Section 17(2) of the CGST Act read with Rule 42 of the CGST Rules and other restrictions applicable if any.

(iv) The applicant is not liable to pay CGST/SGST on amounts which it collects from its members for setting up a corpus fund.

Observations & Findings : Under the GST law, the word ‘supply’ has not been defined but rather the scope of what constitutes ‘supply’ is stated in Section 7 of the CGST Act. For an activity’ to qualify as “supply” in terms of Section 7 of the CGST Act, the following ingredients must be satisfied:

(i) There must be a supply of either ‘goods’ or ‘services’ or both;

(ii) The activity should be undertaken for a consideration

(iii) The activity should be in course or furtherance of business

Section 2(102) of the CGST Act defines “services” to mean anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. The word ‘anything’ used in the said definition does not necessarily imply that everything other than goods, money and securities, is a service.

Section 2(17)(e) of the CGST Act, defines with respect to provision of services by clubs, etc., as follows:

“provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members”.

The Appellant has strongly relied upon the Supreme Court’s decision dated 03-10-2019 in the case of State of West Bengal & Ors vs Calcutta Club Ltd (Civil Appeal No 4184/2009) = 2019 (10) TMI 160 – SUPREME COURT wherein it is stated that supplies made to its members by the member associations, both incorporated as well as unincorporated, are governed by the principal of mutuality and therefore they cannot be charged to tax, be it as tax on sale of goods or as a tax on supply of service. We have gone through the judgment of the Supreme Court in the above cited Civil Appeal wherein the Hon’ble Supreme Court has decided on two issues relating to taxability of sale of goods and provision of services by member’s club to their members. We are concerned only with that portion of the decision which deals with the levy of service tax upon members clubs.

We find that the decision of the Supreme Court was rendered in the context of the provisions of the Finance Act, 1994. In the Finance Act, 1994, the taxable event in terms of Section 66B was on services ‘provided or agreed to be provided by one person to another’. Under GST, the taxable event is the “supply” of goods or services or both.

The exemption as per the entry 77 of the Notification No 12/2017 CT (R) is available only when a member’s contribution per month is upto an amount of ₹ 7500. A member who contributes an amount which is more than ₹ 7500, will not be eligible for the exemption under entry No 77 and the entire contribution amount will be liable to be taxed. Hon’ble Supreme Court of India, Constitution Bench of Five Judges in the case of Commissioner of Customs (Import) Mumbai vs. M/s. Dilip Kumar and Company and Ors (Civil Appeal No. 3327 OF 2007) = 2018 (7) TMI 1826 – SUPREME COURT has held that the benefit of ambiguity in exemption notification cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue/state. Exemption notifications are subject to strict interpretation.

Order : We uphold the passed by the Advance Ruling Authority and appeal filed by the appellant stands dismissed.

[2020 (2) TMI 435 – Appellate AAR, Karnataka – Vaishnavi Splendour Homeowners Welfare Association]

  1. ITC on movable Furniture and Fixtures :

Facts : The Appellant is engaged in providing shared workspace/Office Space to the freelancers, start-ups, small businesses and large enterprises. The Appellant provides a “space-as-a-service” membership model wherein it offers individuals and organizations the flexibility to scale work space up and down as needed. The Appellant procures goods and services from various contractors for fitting-out of the workspaces and provides the said workspace on rent, to various companies and individuals as sharing work-spaces. The Appellant has paid applicable GST on such procurements. Section 16 (1) of the CGST Act entitles a registered person to take credit of input tax charged on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business. However, as per Section 17(5) of the CGST Act, a restriction is imposed with respect to input tax credit (hereinafter referred to as “ITC”) on procurement of goods and services or both received by the taxable person for construction of an immovable property.

The Advance Ruling Authority ruled that no input tax credit can be availed by the applicant on the detachable sliding and stacking glass partition which is movable in nature and capitalized as “furniture and fixture”, and is not capitalizes as an immovable property.

Aggrieved by the impugned ruling relating to the denial of input tax credit on detachable sliding and stacking glass partitions, the Appellant filed this appeal.

Observations & Findings : In the instant case, the foremost test to be applied for triggering the restriction under Section 17(5)(d) is whether an activity of fixing the detachable sliding and stackable glass partitions qualifies as ‘construction of an immovable property’ or not. The normal understanding of the term ‘construction’ is to ‘make or build’ something. For the purpose of Section 17(5)(d), the term ‘construction’ has been defined to include ‘re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.’ In the Appellant’s case, as per the above said explanation, the addition of glass partitions qualifies as ‘construction’. This construction is done by the Appellant on his own account. What remains to be determined is whether the fixing of glass partitions amounts to construction of ‘immovable property’? The term ‘immovable property’ has not been defined in the GST law but rather it is defined in Section 3(26) of the General Clause Act, 1897 as including land, benefits arising out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.” “Attached to earth” is defined in section 3 of the Transfer of Property Act. The detachable sliding and stackable glass partitions are movable property and addition /fixing of glass partitions does not amount to construction of immovable property. Therefore, the procurement of detachable sliding and stackable glass partitions will be eligible for input tax credit and will not be hit by the provisions of Section 17(5)(d) of the CGST Act.

Order : We set aside the Advance Ruling which deals with the eligibility of input tax credit on detachable sliding and stackable glass partitions. We answer the question in appeal as follows: “Input tax credit can be availed by the Appellant on the detachable sliding and stackable glass partitions which is movable in nature.”

[2020 (5) TMI 388 – Appellate AAR, Karnataka – Wework India Management P Ltd.]

  1. Supply of temporary residential accommodation by Religious Charitable Trusts :

Facts : The Appellant is a religious charitable trust registered under Section 12 AA of the Income Tax Act, 1961 carrying out religious and charitable activities. The Appellant is principally engaged in the field of spreading knowledge and advancement of Jain Dharma. The Appellant conducted a religious function. The main activities conducted were Pravachanas, Spiritual Speeches, Dhyana, Meditation, prayer, etc. The Appellant provided boarding and lodging facility to the devotees for which purpose, the Appellant erected temporary residential rooms and facilities and charged rent on some categories of accommodation.

The Appellant sought an advance ruling seeking to know whether the applicant is liable to pay tax on renting of temporary residential rooms and supply of food at concessional rate for consideration to the devotees and renting of space for shops and stalls for the purpose of religious programs where the predominant object is not to do business but for advancement of religion?

The Advance Ruling Authority held that the applicant is liable to pay tax in renting of temporary residential rooms for consideration to the devotees and renting of space for shops and stalls.. The applicant is liable to pay tax on renting of temporary residential rooms of all categories if the declared tariff of a unit of accommodation is ₹ 1,000 or more per day or equivalent.

Aggrieved by the impugned ruling, the Appellant filed this appeal.

Observations & Findings : The entry clause (b) of Sl.No 13 merely states ‘renting of precincts of a religious place to the general public’. To understand what gets covered under this clause, one has to look at the exclusions given in the proviso to this clause which states that the exemption shall not apply to the following:

  1. renting of rooms where the charges are ₹1,000 or more per day,

  2. renting of premises, community halls, kalayanamantaps or open area, and the like where charges are ₹ 10,000 or more per day;

  3. renting of shops or other spaces for business or commerce where charges are ₹10,000 or more per month.

On a conjoint reading of the clause (b) of Sl.No 13 and the exclusions, it is evident that the exemption under clause (b) applies to renting of rooms where the charges are less than Rs. 1,000 per day, renting of premises, community halls, kalayana Mantapsor open area, and the like where charges are less than ₹ 10,000 per day and to renting of shops or other spaces for business or commerce where charges are less than ₹ 10,000 per month.

Order : We uphold the Advance Ruling passed by the Authority and dismiss the appeal filed by the appellants.

[2020 (5) TMI 387 – Appellate AAR, Karnataka – Acharya Shree Mahashraman Chaturmas Pravas Vyavastha Samiti Trust]

Posted in May.

Supreme Court




[A M Khanwilkar and Dinesh Mheshwari, JJ]

Dated: May 6, 2020

Writ- Jurisdiction of High Court – Power to entertain – Assessment order passed –Tax deposited – Appeal filed after expiry of limitation without substantiating reason for delay – Dismissal of – Writ invoked on grounds of injustice allowed and assessment order quashed – Challenge by Revenue – Held writ entertained on mere grounds of assessee’s willingness to explain discrepancies and factum of tax deposit – No finding by High court on failure to substantiate reason for delay in filing appeal or violation of principles of natural Injustice – Non compliance of statutory remedy available – Appeal accepted and writ dismissed

The Revenue has contested the power of High Court to exercise its writ jurisdiction in this case where an alternative statutory remedy exists. The Respondent was assessed for the year 2013-14 and a demand was raised vide order dated 21/6/2017 for the reason that no ;F’ forms were submitted by it in support of its claim. The respondent filed an appeal before the Appellate Authority on 24/9/2018 which was dismissed being barred by limitation as the Respondent had failed to substantiate on the reason for delay. Instead of availing the statutory remedy against the said order, the Respondent filed a writ before the Hon’ble High court seeking an opportunity to explain the discrepancies and consequent quashing of the impugned assessment order.

The Hon’ble High Court had allowed the writ observing that the Respondent had deposited 12.5% tax already and that the Respondent was unaware of the assessment order when it was passed. The impugned assessment order was quashed relegating the respondent to explain the discrepancies. Aggrieved by the order so passed, the Revenue has filed an appeal before the Apex court challenging the authority of High court in exercising its jurisdiction under Article 226 to entertaining a writ in the present case, where an alternative statutory remedy is available.

The Supreme Court has observed that the order passed by Appellate Authority concludes that the respondent had failed to substantiate the reason of delay .That finding has not been examined by the High Court in the impugned judgment and order at all, but the High Court was more impressed by the fact that the respondent was in a position to offer some explanation about the discrepancies and that the respondent had already deposited 12.5% of the additional amount in terms of the assessment order passed. Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non-compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by respondent only on 24/9/2018, without substantiating the inability to file appeal within the prescribed time, no indulgence could be shown to the respondent at all. The appeal is thus accepted and the writ allowed by the High court and the order passed by it is dismissed.

CIVIL APPEAL NO. 2413/2020




[Deepak Gupta and Aniruddha Bose, JJ]

Dated: May 1, 2020

Entries in Schedule – Classification of goods – Car matting – Whether falling under ‘accessory and parts’ thereof under chapter 87 or under ‘carpets and other textile floor coverings’ under chapter 57 – Importance of HSN explanatory notes in arriving at decision emphasized– List of ‘accessory and parts’ contains mechanical components only – Mere fact that the said goods are used only in cars and not home no criteria to transplant them to residual entry ‘ other’ under chapter 87 – Hence, Goods in question held to be falling under chapter 57 being taxable @ 8% under Central Excise Tariff Act, 1985.

The Supreme Court has upheld the decision of the Tribunal in arriving at a decision that the goods- Car Mattings fall under the heading 5703.90 (carpets and other textile floor coverings’ of the First Schedule of Central Excise Tariff Act, 1985.

The Apex Court has considered it valid to take assistance taken from HSN Explanatory notes in deciding the matter. There is no need to resort to common parlance test, marketability test, popular meaning test when the chapter, section notes and explanatory notes view it as being classifiable under the heading 5703.90. The list of components under parts and accessory under chapter 87 are mechanical in nature.

Once the subject goods are found to come within the ambit of that subheading, for the sole reason that they are exclusively made for cars and not for ‘home use’ those goods cannot be transplanted to the residual entry against the heading 8708.

The appeal by Revenue is dismissed.

Civil Appeal Nos. 302-303 0f 2009




[Arun Mishra, M R Shah and B R Gavai, JJ]

Dated: April 22, 2020

Promissory estoppel- Exemption – Excise duty – Notification A was issued in 2001 by Central government granting exemption to new industrial units from paying excise duty on goods cleared equivalent to the amount paid in cash/PLA on finished goods – Investment made by company more than Rs 20 Crores in pursuance thereto – Subsequently notification B issued curtailing the entitlement for refund to 34% and determination of special rate by commissioner where value addition was deemed to be more than actual value – Representations made by manufacturers – Notification C issued in 2008 revising deemed value addition to 75% on goods manufactured with no option of applying of special rate – Writ before High Court allowed on grounds of promissory estoppel- Appeal filed by revenue before Supreme Court allowed as new notification held to be only clarificatory in nature with a purpose to deal with tax evasion by unscrupulous manufacturers which went unvisualized earlier – No violation of vested rights – New notifications issued in public interest – Principle of Promissory Estoppel not to apply.

In this case, subsequent notification was issued by the Central government to lower the exemption percentage on goods cleared by new industrial units many years after the initial notification allowing 100% refund of Excise Duty. Such a notification was held to be clarificatory in nature and not hit by the principle of promissory estoppel.

Elaborating the facts, it is mentioned that in the year 2001, an earthquake caused devastation in area of Kutch in Gujarat. Consequently , to invite investment and to generate employment, the Central Government announced an Incentive Scheme for which a Central Excise Notification No. 39/2001- CE dated 31/7/2001 was issued, the purpose of which was to exempt the goods being cleared from the New industrial unit set up in the Kutch District prior to 31/7/2003 from duty of excise as was equivalent to the amount paid in cash/PLA on the finished goods .The said incentive of refund of the duty paid in cash / PLA was available upto a period of 5 years from the date of production.

The respondent company invested more than Rs 20 Crores in plant and machinery and the incentive limit for such investment was unlimited as there was no upper cap. Various amendments were made in the notification dated 31/7/2001 between year 2001 and 2004 to clarify certain matters and to extend the cut- off date of setting up a new unit from July 31, 2003 to December 31, 2005.

The respondent company set up their new unit in the area of Kutch only in pursuance of the original notification dated 31/7/2001 which granted exemption. This notification was amended by another notification No. 16/2008 – CE dated 27/3/2008. After amendment it was provided that the benefit of refund would be granted with reference to the value addition, which was notionally fixed @ 34% for the commodity manufactured. It also provided for determination of a special rate by the Commissioner in cases where the actual value addition was more than the deemed value addition as specified. This amendment led to their entitlement of refund being reduced from 100% to 34 %. Many companies and manufacturers made representations before the government for reconsidering the amendment made to the original notification. Resultantly, another notification was issued by the Central government – No. 51/2008 dated 3/10/2008 revising the deemed value addition to 75% in respect of products manufactured by the respondent company without giving any option for applying for a special rate.

The company approached the Hon’ble High Court by way of writ and contended that the promised incentive was curtailed midway before the expiry of 5 years and the subsequent notification amending the original notification dated 31/7/2001 was in breach of the principle of Promissory Estoppel. Writs filed were allowed on the ground of Promissory Estoppel. Aggrieved by the order of the Hon’ble High court, the Revenue filed an appeal before the Apex Court.

The Apex court held that The High Court has committed an error in quashing and setting aside the subsequent notification impugned before the High Court on the ground that they are hit by promissory estoppel and that they are retrospective and not retroactive.

The impugned notifications are clarificatory in nature and it can be said that it was an act to remove doubts.

Elaborating the circumstances due to which new notification was issued it was held that during the operation of earlier notifications it was noticed that certain unscrupulous manufacturers were indulging in tax evasion activities. This situation was not visualized by the government while issuing the earlier notifications Hence, another notification was issued which was clarificatory in nature. The subsequent notifications do not take away any vested right conferred under the said notifications. They were issued in public interest and seek to achieve the original object. Therefore, they are not hit by the principle of Promissory Estoppel. Therefore, the appeals are allowed.

Civil Appeal Nos. 2256-2263 of 2020




[Aniruddha Bose and Deepak Gupta, JJ]

Dated: April 27, 2020

Delivery of goods – Interstate sale – Goods bought from outside the state – Goods remained with transport company for over a month – ‘Constructive delivery’ assumed to have taken place after the time period as fixed by Tax Administration-exemption claimed u/s 6(2) of Rajasthan Sales Tax Act, 1964 rejected -Sale of such goods beyond the fixed time frame considered sale within the state –Held by Supreme court that S. 3 of 1956 Act is silent on time frame within which delivery ought to take place –States expressly that movement of goods would terminate only on delivery – No concept of constructively delivery – Fixing of time frame by tax administration not permissible – Interpretation of the provisions by tax administration based on trade practices not allowed – Appeal by revenue dismissed

Defining the scope of delivery as per S.3 of the Central Sales Tax Act, the Hon’ble High Court has passed an order where initially the assessee had purchased electricity motors and its parts from outside the state and sold it to the dealer within the state of Rajasthan. Documents of title were transferred during the movement of goods from one state to another and exemption u/s 6(2) of Rajasthan Sales tax Act 1964 was obtained. After the goods remained with the transport company upon their arrival at the Kota region for more than a month, the Revenue deemed the assessee to have taken constructive delivery of goods and sale of such goods after that period was deemed to be sale within the state. As per the revenue, such a sale attracted 12% tax on sale of goods within the State. Penalty and interest were imposed alongwith it by the tax officer.

It is worth mentioning here that the Tax Administration had issued two circulars dated 16 September 1997 and dated April 15, 1998 vide which the time frame for holding of goods in carrier’s godown was fixed beyond which the Revenue was to treat constructive delivery of goods involved. The High Court quashed the two circulars and upheld the order of the tax board. Aggrieved by the order of the High Court, the Revenue has filed an appeal before the Supreme Court.

The Court held that fixing the time frame by the Tax Administration is not permissible for the reason that in section 3 of the Central Sales Tax Act,1956 the term ‘delivery’ does not specify any time frame within which such delivery shall have to take place .It only specifies as to when the movement of goods is deemed to commence and that the time of termination of movement of goods is when the goods are taken from the carrier.

There is no concept of constructive delivery either expressed or implied. Section 3 of the 1956 Act states that the movement of goods would terminate only when the delivery is taken. The Tax Administration Authorities cannot interpret the legislative provisions on the basis of their perception of trade practice. Giving meaning would mean supplying words to legislative provisions as if to cure omissions of the legislature. Hence, the appeals are dismissed.

Civil Appeal No. 2217 of 2011

High Courts


Tata Hitachi Construction Machinery Company Pvt Ltd.


State of Karnataka

[Hon’ble Mrs. Justice S. Sujatha The Hon’ble Ms. Justice Jyoti Mulimani]

Dated : March11, 2020

Statutory Forms – Delay in producing – Statutory forms not filed in time – Concessional rate of tax denied on turnover – Penalty and interest also imposed – Forms produced before Tribunal not accepted as no sufficient cause given for the delay – On appeal High Court observed that undisputedly concessional levy of tax is meant for benefit of assessee – Since no material was placed on record by assessee to justify delay in production – Hence matter remanded to Tribunal to reconsider the application submitted alongwith ‘C’ forms furnished at this stage and re examine the matter – Petition disposed off.

In this case the concessional rate of tax has been denied to the petitioner on its turnover due to non filing of ‘C’ forms .The petitioner claims that for the relevant tax period, the turnover on the interstate sales of equipments, machineries and spares not covered by C-Forms were subjected to higher rate of tax by the Assessing Authority. The Assessing Authority had also levied penalty and interest under Section 72(2) and Section 36 of the KVAT Act, 2003. Before the Appellate Tribunal, additional C-Forms submitted by the petitioner relating to the relevant tax period with an interim application came to be rejected. Hence, the petitioner filed Revision Petitions seeking permission to produce C-Forms and 10 such original C-Forms are also placed before the Hon’ble Court along with the said application.

The Court held that It is well settled that the statutory declaration forms would be accepted by the Appellate Authority keeping in mind the inter-state transactions effected and on the sufficient cause shown by the assessee in obtaining such declaration Forms from the purchasers. Merely for the reason that C-Forms are produced belatedly, it cannot be rejected. It is also apparent that the petitioner has not placed on record satisfactory material to establish the circumstance of consignment agent and purchasers withholding the concerned declaratory Forms disabling the petitioner in producing the same within the relevant time prescribed under Rule 12(7) of the Rules. The original C-Forms now placed before the Court required to be examined in the light of the material to be placed by the petitioner to substantiate the reasons for the delay subject to authenticity of the documents.

It is not in dispute that concessional levy of tax which is provided by the legislature is to the benefit of the assessee, if such benefit is denied on technicalities, the purpose and object of extending the concessional rate of tax would be defeated. Hence, in the circumstances, the matter is remanded to the Appellate Tribunal to reconsider the applications submitted by the petitioner for production of C-Forms as well as original C-Forms now furnished before this Court.

C/W STRP NO.100017/2016


Paresh Nathalal Chauhan


State of Gujrat

[Honourable Mr. Justice G. R. Udhwani]

Date of decision: May 5, 2020

Arrest – Bail – Bogus invoices – Claiming ITC wrongfully in connivance with others – Arrest u/s 439 of CrPC – Bail sought on medical grounds –Well designed plan floated by accused needs thorough investigation– Possibility of it being a huge racket ,releasing the accused may lead to manipulation of evidence – No serious ill health of accused indicated – Investigation at crucial stage – Hence, application dismissed- Central Goods and Services Act, 2017

An application is filed u/s 439 of CrPC, 1973 in respect of an offence punishable u/s 132 of CGST Act, 2017.The accused is alleged to have obtained a huge amount of ITC( 60 Crores) in connivance with others who are not arraigned as accused as yet. The bail is sort on medical grounds that i.e. heart ailment of petitioner. The Hon’ble High Court has observed that the case requires thorough investigation with the possibility of adding more to the array. It could be a huge racket and releasing the applicant could mean potential threat to the investigation. In absence of detection of this crime, it would have continued causing more loss to the state exchequer. The quantum in the instant case is not important but the well designed pre-meditated plan floated by the accused to loot the public exchequer. There is nothing to indicate about then ill-health of the petitioner. Hence, the application is dismissed.

Application No 6237 of 2020

High Court of Telangana

Shiv Shakti Enterprises


Union of India and others

[M.S. Ramchandara Rao & T. Amarnath Rao, JJ]

Date of decision: March 4, 2020

Penalty – Goods in transit – Wong destination – Interstate purchase of goods – Goods in transit detained on grounds of wrong destination- Tax under CGST and SGST Act, 1975 levied alongwith penalty under threat and coercion- Held mere possibility of goods being delivered at a different destination is no ground to impose penalty – Possibility of driver losing way acceptable – Tax evasion not possible as IGST stood paid– Family wedding function is a good reason to pay tax and penalty by petitioner leaving no choice- No SGST provisions seen to be violated – Goods accompanied with proper documents – Action of Respondents arbitrary and violative of Articles 14, 265 and 300A of Constitution of India- Writ allowed with a direction to take disciplinary action against the Respondent and imposing costs.

In a recent case, the goods were bought from Karnataka by to Hyderabad dealer. They were accompanied with proper documents after payment of IGST@18%. However, the goods were detained due to ‘wrong destination’ as the vehicle had gone ahead of the destination mentioned. Assuming it to be an attempt to evade tax, tax under CGST and SGST Act, 1975 were levied alongwith penalty, which the petitioner alleges to have paid under coercion and threat.

A writ is filed in this regard where the Court has held that mere possibility of goods being delivered to a different address or being sold locally cannot be a ground to impose penalty under the GST Act, 1975. More over the goods had already suffered IGST, so escaping tax was is not possible. The Court observed that the day the goods were detained , there was a family wedding in the petitioner’s house due to which it had to pay the tax and penalty amount for release of goods due to economic duress leaving him with no choice. It is also possible that the driver lost its way. The goods were in interstate transit and there is nothing to show any violation of SGST provisions. The Court has held that the action of respondent no.1 is arbitrary and against the Consitutional provisions. The writ is allowed directing Respondent no.3 to take a disciplinary action against Respondent 1 and further directed the latter to pay cost.

Writ Petition No 2161 of 2020

High Court of Punjab & Haryana

Excise and Taxation Commissioner, Haryana


M/s Nivachem Pvt Ltd and another

[Ajay Tewari and Avneesh Jhingan, JJ]

Date of decision: January 13, 2020

Classification – Entries in schedule – Black Disinfectant fluid- whether falling under schedule C or under residuary Entry of HVAT Act 2003- held – BDF rightly falls under the definition of ‘drugs’ in the Drugs and Cosmetics Act, 1940- common parlance test applied – requisites to fall under Entry 25 of schedule C of HVAT Act i.e. item being a drug and should be licensed are fulfilled by BDF – Resort to residuary entry not to be made as the said item falls under specific entry of Schedule C of 2003 Act- Appeal dismissed

An appeal is filed by the department before the Hon’ble High Court against the decision of Tribunal in holding that the Black Disinfectant Fluid (BDF) fell under the category ‘Drugs’ of Entry 25 of Schedule C of HVAT Act and is therefore leviable to a concessional rate of tax. It has alleged that the said product cannot fall under schedule C as the list contains specific items and BDF has no mention therein. Instead the product should fall under the residuary entry.

The proposition is well settled by the Supreme Court in the judgments of many other cases whereby it has been laid down that in interpreting the entries of fiscal statutes , common parlance test is to be applied. In other words, as the goods are understood by the people dealing with it.

In the absence of a definition of drugs under the 2003 Act, reliance was rightly placed on S. 3(b) of the Drugs and Cosmetics Act, 1940 Act which is wide enough to include medicines for internal or external use by human beings/animals and it covers all substances intended to be used for prevention of any disease in humans or animals. It explains how people dealing with it understand the same.

The argument of the department that Entry 25 applied only to products for consumption of human beings and animals does not emanate from the Entry. The requisite is that it should be a drug and produced under a license. Both the requisites are fulfilled by the product BDF.

Moreover, a letter from the official dealing with the said product has been produced before the court which states that the said item falls under category of drugs and is defined in S 3(b) of 1940 Act.

The contention of the department that the product should be covered under the residuary entry is unacceptable as residuary entry is resorted to only when the item doesn’t find mention in a specific entry. Here BDF is covered under schedule C of HVAT Act, 2003Hence, the item in question is covered under the ‘drugs’ of entry 25 of schedule C. The appeal is dismissed.

VATAP No 165 of 2019

Rajasthan High Court




[Dinesh Mehta, J]

Date of decision: May 13, 2020

Bail – Fraud – Refund – Bogus firms allegedly created for claiming refunds and money transferred to bank accounts of relatives – Arrested for offences punishable under the IPC – Bail sought by petitioner with an undertaking of restrictions in his withdrawals, alienation of property, etc. – Considering that investigation stood completed and the undertaking offered, bail granted with a direction to furnish personal bond and two securities

An application for bail has been filed by the petitioner under Section 439 of the Cr.P.C. for the offences under Sections 420, 406, 467, 468 and 471 IPC.

It is alleged that the petitioner has devoured huge amount of Rs. 17 crores by fraudulent transactions and that the petitioner is kingpin of the whole fraud committed by him and of creating bogus firms/companies claiming GST Refunds for the transactions which never took place. It is further submitted that the money withdrawn by the petitioner has been deposited in the bank accounts of his relatives. If the petitioner is enlarged on bail, there are chances that he may influence the witness and recovery of the embezzled public money will be difficult. The petitioner is , however, willing to put himself to certain restrictions like alienation of property, surrendering of passport, restriction on bank withdrawals and furnishing its details.

The Court has observed that the investigation against the petitioner has already been completed and he is in judicial custody. The police have filed charges sheet against the petitioner for the offences, which are triable by the Court of Magistrate. Having seen the totality of the circumstances and the undertaking offered, the Court grants bail to the petitioner u/s 439 of CrPC. The petitioner shall be released on bail on his furnishing personal bond in the sum of Rs. 1,00,000/- and two sureties of Rs. 50,000/- each.

Criminal Miscellaneous Bail Application No. 15005/2019





(Vipin Sanghi and Sanjeev Narula, JJ)

Date of Decision May 5, 2020

Returns – GSTR-3B – Rectification – Allowed in the period for which the return has been filed – Circular providing for correction of return only in the period during which error is notice held to be contrary to CGST Act – Writ Allowed.

The petitioner laid a challenge to Rule 61(5) of CGST Rules, 2017, Form GSTR-3B and Circular No.26/26/2017-GST Dated 29.12.2017 as ultra vires the provisions of CGST Act, 2017 and contrary to Articles 14, 19 and 265 of the Constitution of India.

The challenge had been made principally for the reason that petitioner is being prevented from correcting its monthly GST returns which had been filed in Form 3-B and consequently seeking refund of the excess tax paid.

Allowing the writ : The Court observed that CGST Act contemplated is self policing system under which the authenticity of the information submitted in the returns by registered person is not only auto populated but is verified by the supplier and confirmed by the recipient in the same month. The statutory provisions therefore were not only procedural but provided a right and a facility to a registered person by whom it could be ensured that the ITC availed and the returns can be corrected in the very month to which they relate and the registered person is not visited with any adverse consequences for uploading incorrect data.

While the provisions of the Act envisaged the filing of returns and payment of taxes in a systematic manner, due to system issues and under preparedness the necessary functionalities in Form GSTR-2 and 3 were not made operational and have been now completely done away with. There is no reason that petitioner should be denied the benefit of correcting its returns in accordance with the scheme of the act which is being sought to be stifled by the respondents by permitting only limited rectification of returns.

Further circular no. 7/7/2017 acknowledged the fact that manual filing of forms can result in errors and thus allowed the correction of same in form GSTR-1 and GSTR-2 which would be auto populated and reflected in the return in Form GSTR-3 for that particular month. However, due to indefinite postponing of the filing of returns in GSTR-2 and 3 the impugned circular no.26/26/2017 was introduced on 29.12.2017, temporarily suspending the operation of circular no.7/7/2017. While doing so by virtue of Para 4, a limited facility for rectification of returns already filed in from GSTR-3B had been permitted by adopting the correction in the GSTR-3B filed for the month in which the mistakes are noticed.

The Court thus went on to hold that Para-4 of Circular No.26/26/2017-GST Dated 29.12.2017 is not in consonance with the provisions of CGST Act, 2017 and held it to be arbitrary. The court allowed the petition and permitted the petitioner to rectify Form GSTR-3B for the period to which the error relates.

W.P.(C) 6345/2018






Date of decision : May 5, 2020

Transitional Credit – GST – Tran-1 not filed within time – Credit accrued is a vested right – Cannot be taken away by subordinate legislation – Period prescribed is also not sacrosanct – Is only directory – In absence of any mandatory period the limitation prescribed under Limitation Act of 3 years to enforce civil rights is applicable – Writ allowed.

The petitioner claims that in terms of the latest service tax returns from April, 2017 to June 2017, it had accumulated CENVAT Credit balance. The petitioner was unable to file the declaration in Form Tran 1 within the prescribed due date. As a result it was deprived of taking forward the credit balance in the new GST regime.

On writ held:

The CGST Act was introduced in July 2017. In pursuance to Section 140(1), Rule 117 was framed which imposed a limit of 90 days for availing the CENVAT Credit accumulated by way of filing of declaration in form TRAN-1 electronically. However, due to network problems, low bandwidth and many other technical problems, assessees had faced problems in filing forms. Hence, the period for filing of forms under Rule 117 was extended many times by the respondents, which shows that the period for filing of TRAN 1 is not considered sacrosanct or mandatory either by legislature or the executive.

The credit standing in favour of the assessee is property and it cannot be deprived of it by virtue of Article 300A of the Constitution. The petition is allowed and respondent is directed to either open online portal so as to enable the petitioner to file Form TRAN-1 electronically or accept it manually by 30/6/2020.

The court also went on to hold that the government could not curtail the vested right and restrict it to 90 days by a subordinate legislation. Conscious of the circumstances prevailing, the taxpayers cannot be robbed of their valuable rights on an unreasonable and unfounded basis of them not having filed TRAN 1 Form within 90 days, when civil rights can be enforced within a period of 3 year from the date of commencement of limitation under the Limitations Act, 1963.

Rule 117 is, thus, read down as being directory in nature, in so far as it prescribes the time limit for transfer of credit and the same would not result in forfeiture of rights in case credit is not availed within the prescribed period. In absence of any specific provision under the Act, in terms of residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing such credit.

W.P.(C) 11040/2018

High Court of Andhra Pradesh

Walchandnagar Industries Limited


The Commercial Tax Officer


Date of decision: May 11, 2020

Assessment – Natural Justice – Covid-19 Pandemic – Extension of Limitation – Supreme Court – Article 142 – During Assessment Petitioner sought exemption due to Covid-19 – Adjournment sought refused and impugned order passed without personal hearing – On Writ – Order passed is violative of Natural Justice – Supreme Court extending the limitation period in all matters due to pandemic – Writ allowed and respondent directed to issue a notice as the restriction on movement is lifted.

The petitioner was sought by the respondent officer of taxation to appear before him. Letters were addressed to the respondent officer seeking exemption due to the prevalent pandemic situation of Covid -19. It was not possible to file a detailed reply as it was impossible to access the records from its offices situated at distant places. An adjournment was sought which was refused and as a result the impugned order along with penalty was passed without hearing the petitioner personally.

Held: The respondent misconceived the order of Supreme Court extending the period of limitation in all matters in the given situation. The plea of the petitioner that it was not able to access the records is convincing. The writ is maintainable as there is a failure of rules of natural justice and entails fair hearing. Writ is hence allowed with a direction to the respondent to issue a notice for hearing after the movement on restriction is lifted, giving the petitioner two weeks time to appear with this reply.

Writ Petition No.8425 and 8451 of 2020

Posted in May.


This Article is a study on the labour issues vis-à-vis the pandemic. The article attempts at a deep dive into the analysing the policies of the administration and its implications & repercussions faced by both, the employer & employee. The paramount issue being the payment of wages under the direction of the Government. The article, analyses various strategies which can be adopted by employer to mitigate its liability and the same time adhere to the government policies and moral obligations

The Article relevant to every stakeholder of business, viz. employers, key management personnel, consultants, human/industrial relations personnel etc. to understand the obligations and legal implications under the labour policies of the Government in response to the lockdown. The article is divided into 6 parts, Part I-Background gives a basic insight on the actions taken by the administration in curbing the pandemic by imposing a lockdown and the repercussions under labour laws. Part II-The Order directing payment of wages, is the action taken by the administration to ensure there is no movement of migrant workmen and payment of wages to all workmen; this Order is the epicentre of the Labour issues. Part III- Analysis of the Order, elaborates on the ambit of the order and the lacunae in interpreting the language of the order to achieve its intentions. Part IV- Non-adherence to the Order, discusses the legal implications on the employers and organisation on account of not following the directions of the administration. Part V- Challenges before the employers, attempts at analysing the feasibility & non feasibility of various structures of payments so as to ensure there is no conflict with the Order. Part VI- Way forward is an epilogue, which provides a suggestion to the government to find a balance in their policies so as to ensure a win-win situation.

I. Background

During the last quarter of 2019 the City of Wuhan, China was the first to report cases of a serious contagious-respiratory disease, which in the days that followed, exponentially spread, resulting into a pandemic and changing the status quo of the world.

On 25th January, 2020 the Ministry of Health and Family Welfare issued Guidelines for Infection Prevention and Control in Healthcare Facilities which prescribed certain procedures and practices to be adopted for prevention and control of infections.

However, daily life and commerce continued and on 20-21st of March, 2020 the Ministry of Health advised to invoke the provision of section 2 of the Epidemic Diseases Act, 1897. Subsequently, on 24th March, the Hon’ble Prime Minister, Shri Narendra Modi declared a 21-day Nationwide lockdown. Consequently, most of the activities of trade and commerce which required the employees to be present at the workplace came to a halt.

Further, the National Disaster Management Authority assessing the situation across the globe and in the country passed an Order No. 1-29/2020-PP (Pt II) dated 24th March 2020 invoking section 6 (2) (i) of the Disaster Management Act, 2005 (‘DM Act’) thereby directing Ministries & Departments of the Central Government and State Authorities to make measures to ensure social distancing. This order was issued in light of World Health Organization declaring the COVID 19 as a pandemic, and a threat posed to India. The lockdown was further extended vide Order dated 14th April, 2020 bearing No. 40-3/2020-DM-I(A) until 3rd May, 2020. Further, the Ministry of Home Affaris vide Order of even dated 1st May, 2020 bearing No. 40-3/2020-DM-I(A) further extended the lockdown for a period of two weeks.

The Labour issue that arose on account these orders are with respect to payment of wages to the employees during the period of lockdown. As business operations have not resumed, the employers are also faced with a cash crunch. On the other hand, laborers and workmen who live hand to mouth require some amount for their livelihood. Subsequently, a lot of migrant workmen decided to move back to their respective home-towns.

II. The Order Directing Payment of Wages

With all industries in various sector shut due to lockdown, a large number of workmen had no option but to leave for their hometown which in turn led to inter-state and intra-state migration. In order to mitigate the economic hardship and to ensure strict implementation of lockdown measure, further addendum was issued vide Order No.40-3/2020-DM-I(A) dated 29th March 20201 (‘the Order’). The Order directs the Governments and State authorities to issue order to their respective District Magistrate/Deputy Commissioner and Senior Superintendent of Police on the certain measures for payment of wages. Relevant portion of the order is usefully extracted as under:

“Whereas, to deal with the situation, and for effective implementation of lockdown measures, and to mitigate the economic hardships of the migrant workers… to take the following additional measures.’

‘III. All the employees, be it in the Industry or in the shops and commercials establishment, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishment are under closure during the lockdown.”

(Emphasis supplied)

It is imperative to note that the order granting wages has been extended to include all workers i.e. migrant workers, factory workers, workers of shops & establishment etc. The lack of clarity of in the order has resulted in to ambiguity and unnecessary confusion for which no further clarifications have been made until date.

III. Analysis of The Order

It is necessary to peruse through the Order for better understanding of its implications on the employers and the industries. It is a fact that due to lockdown most industries are shut and thus no work is being carried on by any of the workers. An exception is made for the workmen, who are in the employed under essential goods manufacturing or service-related industries.

The relevant question is whether it would be fair and legal to impose such a liability upon the employer. The definition of ‘Wages’ as laid down in the Payment of Wages Act, 1936 is usefully extracted as under:

“2. (h) (vi) “wages” means all remuneration (whether by way of salary, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes-

(a) any remuneration payable under any award or settlement between the parties or order of a Court;

(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;

(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);

(d) any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum, whether with or without deductions but does not provide for the time within which the payment is to be made;

(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include–

(1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a Court

(2) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of 14 [appropriate Government];

(3) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;

(4) any travelling allowance or the value of any travelling concession;

(5) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or

(6) any gratuity payable on the termination of employment in cases other than those specified in sub-clause (d).]

(Emphasis supplied)

That, the above definition is an inclusive definition and a liability to pay wages can cast upon an employer as envisaged under Section 2 (h) (vii) (e) of the Payment of Wages Act, 1936 only in lieu of a Scheme. However, no such scheme has been framed. Therefore, without a scheme in place, the employer cannot be expected to make a payment of wages as per the Payment of Wages Act, 1936.

Further, an advisory to all workers and Employers’ organizations was issued by the Ministry of Labour & Employment dated March 19, 2020 bearing No. D.O. No. M- 11011 /08/2020- Media inter alia suggesting that during the period of non-operation to deem the workmen to be on duty. This being in the nature of advisory, it raises the question as to whether the payment made to an employee is a moral obligation or a legal one.

The Ministry of Corporate Affairs in its FAQ dated 10th April 20202 stated that payment of wages during lockdown is a moral obligation of the employers and hence such payment shall not qualify as admissible Corporate social responsibility (CSR) expenditure.

Apart from the above there exists other lacunae in the order. There exists a confusion with respect to payment of the wages as per minimum wages applicable or the last drawn wages of the workmen? The only aiding interpretation provided is that wages is to be paid without any deduction. Expecting an employer to make payment as per the last drawn wages, in the absence of any economic activity would cast a huge economic burden on the employer. Most of the employers under any circumstances would not be able to bear such huge cash outflow.

IV. Non-Adherence to The Order

As per the said Orders, if the employers fail to adhere to the same it would attract the relevant provisions of the DM Act.

The provisions of the DM Act in respect of the contraventions are as under:

“57. Penalty for contravention of any order regarding requisitioning.—If any person contravenes any order made under section 65, he shall be punishable with imprisonment for a term which may extend to one year or with fine or with both.”

(Emphasis supplied)

Further, Section 58 of the DM Act is usefully extracted as under:

  1. Offence by companies.—

(1) Where an offence under this Act has been committed by a company or body corporate, every person who at the time the offence was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing in this sub-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 exercised due diligence to prevent the commission of such offence.

(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 was committed with the consent or connivance of or is attributable to any neglect 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.

Explanation.— For the purpose of this section—

(a) “company” means any body corporate and includes a firm or other association of individuals; and

(b) “director”, in relation to a firm, means a partner in the firm.”

As per the Consolidated Guidelines issued by the Ministry of Home Affairs dated March 28, 2020, any person violating these containment measures will be liable to be proceeded against as per the provisions of Section 51 to 60 of the DM Act, besides legal action under Section 188 of the Indian Penal Code, 1860 (‘IPC’).

Offence under Section 188 of the IPC is a cognizable and a bailable offence. Therefore, on violation of the above order/guidelines, the police have to first register a case/file a First Information Report (FIR) against the accused or the Enforcement Officer file a complaint directly before the Ld. Magistrate Court. However, the offence being bailable, the accused will be granted bail by the Ld. Magistrate Court.

V. Challenges before The Employers

It needs to be understood that a fine balance must be established between the employer and employees with respect to payment of wages. There is no victory where payments are made to the employees and subsequently, the business goes down. The employees need to realize that in the event the business goes down, they will also go down with it, it will be extremely difficult or virtually impossible to find new employment opportunities post lifting of the lockdown.

Some of the practical challenges faced by the employers in payment of wages are as under:

Adjustment of salary against leave: Although the employer cannot compel its employers to adjust their leave privileged. A suggestion can be made to the employees to utilize their annual leave privileges.

As per Rule 18 of the Industrial Employment (Standing Rules) Central Rules, 1946, the employer may, at any time, in the event of an epidemic or other cause beyond his control, stop any section or sections of the establishment, wholly or partially for any period or periods without notice.

Further, as per the said rules in case where workmen are laid off for short periods on account of failure of plant or a temporary curtailment of production, the period of unemployment shall be treated as compulsory leave either with or without pay, as the case may be.

Therefore, a settlement can be arrived under section 2 (p) of Industrial Disputes Act, 1948 (‘ID Act’) between the workmen and the employer consenting to such an arrangement.

Layoff, termination or retrenchment: Although the ID Act under section 2(kkk) does allow ‘lay-off’ if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason.

However, this conflicts with the Order dated March 29, 2020. As the Order is issued under the DM Act, a special statute, the principle of Generalia specialibus non derogant and Generalibus specialia i.e. Special law over rides general law, will apply. Therefore. The DM Act will prevail on the ID Act.

Ex gratia payment under Se.2(p) Settlement: Another effective arrangement could be a settlement under section 2(p) of the ID Act, between the worker and employer for an ex gratia payment during the period of lockdown.

This would achieve the objectives of the government, employer and employee. Further it safeguards Article 19 (right to trade or business) and Article 21 (right to life).

Deferral or reduction of wages: The deferral or wages is not permitted under section 5 of Payment of Wages Act, 1936 (PW Act). The Hon’ble High Court of Kerala in the case of Kerala Vydyuthi Mazdoor Sangham vs. State of kerala and Ors. WP(C) TMP No. 182 of 2020 order dated April 28, 2020 held that deferment of salary during lockdown amounts to denial of property.

Petition before the Hon’ble Supreme Court: Both the Employers and Employees have approached the Hon’ble Supreme Court. The cases National Alliance of Journalist & Ors vs UOI Writ Petition bearing Diary No. 10948/2020/2020 and Ficus Pax Pvt. Ltd. Vs Union of India [2020] SC W.P(c)Diary No. 10983/2020 are both sub judice before the Hon’ble Supreme Court

It is the contention of the Employers that, the wages have to be earned by the Workman or in lieu of a Scheme as explained earlier and any free payment or charity shall not fall within the definition of wages. During the lockdown, the workers are not carrying out job and in such circumstances, the Government has no right to direct the Employers to pay the wages and the said payment shall be construed as ex-gratia payment and not wages as such, there cannot be any criteria as to what amount to be paid to the Employees as ex-gratia

Secondly, the PW Act is applicable to a class of employees drawing wages up to ₹ 24,000/- per month as defined under section 1 (6) of the PW Act. Hence, the said notification/order of the Central Government should be limited to the employee drawing wages up to
₹ 24,000/- per month.

The third submissions made by the Employers Association is that ESI Corporation should pay 70% of the salary to eligible workmen from the corpus. The association stressed that the Government should tap funds lying with it as welfare corpus to pay wages to the Employees covered under the ESI Act. that, as per law, the workman who is not able to attend the work due to any sickness and who is covered under the ESI Scheme is entitled to get “Sickness Benefit” to the tune of 70% of his wages during the said period.

The fourth contention is it is incumbent upon the Government to look after the Public in the case of any epidemic or warlike situation as contemplated under the DM Act. It is the duty of the Government under section 46-48 of the DM Act to arrange National Disaster Fund. Instead of using the rightful resources, the Government has imposed the burden upon the Employers.

The Decision of the Hon’ble Supreme Court will provide much clarity in the issue of payment of wages to workmen.

VI. Way Forward

Reiterating, Section 72 of the DM Act provides overriding but any order or law cannot have draconian effect. Article 14 of the Constitution of India says that the States shall not deny to any person equality before law or the equal protection of the laws within the territory of India. Rule of Law embodied in Article 14 is the basic structure of the Constitution3. The attribute of “Rule of Law”, Prof A.V Dicey stated “equality before the law and equal subjection of all classes to the ordinary law of the land administered by the ordinary law courts.”4 That the employers of the establishments cannot be economically discriminated and be subjected to pay full wages/salary based on the presumption that they are not facing hardships. The employers are facing huge economic hardships at present as well in the coming future. The employers have to make payment towards various other resources in their production apart from human resources.

Article 19 of The Constitution of India, 1949 is extracted below:

“19. Protection of certain rights regarding freedom of speech etc.

(1) All citizens shall have the right

(g) to practice any profession, or to carry on any occupation, trade or business…”

Though under Article 19(6) of the Constitution provides for reasonable restrictions, can such imposition of payment be considered fair and proper. passing Order compelling the employers to pay full salary during the lockdown seems arbitrary and does not seem appropriate. No provision of the DM Act demands such payment.

The Order passed under the special statute for payment of full wages seems unfair and unjust. Though, Section 72 of the DM Act allows the Act to override all other statutes, it is necessary to ensure that the special statute is not unfair and ultra vires the Constitution.

Issuing order/advisories to not terminate workmen and make full payment towards their wages may not go hand in hand. It will have disastrous consequences and plummet the economy further. If both the directions are to be complied with, which would be with extreme difficulty, the establishments will soon have to close and retrench workmen causing further severe hardships to the workmen.

It is in the best interest of all the stakeholders to not impose such arbitrary order against the employer. A balance is required to be achieved between the hardships of the employer and employee, so that one is not favored over the other.


  1. The Ministry of Home Affairs, Government of India, Order No. 40-3/2020-DM-I(A) dated 29th March 2020


  1. Ministry of Corporate Affairs, Government of India, F. No. CSR-01/4/2020-CSR-MCA

< http://www.mca.gov.in/Ministry/pdf/Notification_10042020.pdf>

  1. Kesavananda Bharati and Ors vs State of Kerala, AIR 1973 SC 1461.

  2. A V Dicey, The Law and the Constitution, 1915

Posted in May.
  1. Parliament has enacted certain draconian provisions in the GST laws. The implications of those provisions, relating to burden of proof, are required to be brought to the notice of GST Professionals. Therefore, this article.

Input Tax Credit

  1. Section 155 of the Central Goods & Service Tax Act, 2017 (CGST) casts the burden of proof qua the ITC on the claimant businessman. It reads as follows:

    ‘Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.’

  2. Parliament should have thought of the capacity and functioning of the bureaucracy before enacting such provision. Several registrations were cancelled for one or the other reason in the year 2017 itself and those were thereafter restored under the Proviso to Section 30(1) in the F. Y. 2019-2020. The data of outward supplies of such persons was not available for matching. Further, the system of allowing ITC is absolutely one sided. In the current return filing scenario, the supplier uploads his invoices through GSTR 1, which eventually reflects in the ITC of claimant dealer’s 2A. If the supplier misses out uploading some invoices the purchaser does not have any facility to upload the invoices on his own. It could have been possible, if original plan of GSTR 1-2-3 had been implemented by the Government. In such circumstances, it is impossible to discharge the burden so cast under Section 155.

  3. Even though the terms, ‘Burden of Proof’ and ‘Onus of Proof’ are being used interchangeably, still, those have definite meanings. The Bombay High Court in the case of Phoenix Mill Ltd. Vs. Union of India, 2004 (168) ELT 310 has lucidly explained the difference between the two in the following words,

    ‘There is essential distinction between burden of proof and onus of proof. The burden of proof lies upon the person who has to prove a fact and it never shifts. However, the onus of proof shifts. Onus means a duty of adducing evidence.’

  4. The term burden of proof used in Section 155, in the circumstances narrated above, is required to be interpreted to mean onus of proof. It would shift to the departmental officials if no data or improper or insufficient data is available.

  5. No doubt the ITC is the form of concession. Therefore, the law prescribing the grant of ITC subject to the compliance of the conditions is always upheld by the Supreme Court. Thus, the constitutional validity of the law granting ITC qua inter-State sale conditional on the production of C Form has been upheld by the Court in TVS Motors vs. State of Tamil Nadu, 2018 (18) GSTL 769. It be noted that the condition prescribed therein of filing of C form was capable of performance and the legal burden could be cast on the claimant dealer. Therefore, it’s validity was upheld. But even conditions for concessions are governed by Part III of the Constitution and hence cannot be arbitrary or unreasonable, or violative of any constitutional or fundamental right.

Presumption of Culpable Mental State:

  1. This is another draconian provision. It is enacted under Section 135 of the Act. However, it applies only to cases wherein the prosecution proceedings have commenced. It does not apply to normal penalty proceedings. The Telangana High Court in the case of P. V. Ramanna Reddy vs. Union of India, 2019(25) GSTL 185 has refused to give an interim protection against the arrest to the high ranking officials of the Corporates which were alleged to be involved in the circular trading. The apex court approved the order of the High Court. It is reported in 2019 (26) GSTL J175. It is now quite possible that to extract the revenue the prosecutions will be liberally sanctioned. Therefore, it is necessary to understand this provision and the onus involved therein.

  2. The law was otherwise earlier. The accused was presumed to be innocent and the onus was on the prosecution to prove the guilt of the accused. However, this initial onus on the Department could be sufficiently discharged by the circumstantial evidence. The law did not require the prosecution to prove impossible. All that was required was the establishment of such a degree of probability that a prudent man might, on the basis, believe in the existence of the fact in issue. The legal proof is not necessarily a perfect proof, often it is nothing more than a prudent man’s estimate as to the probabilities of the case. Kindly see Issardas Daulat Ram vs. Union of India (1962) Supp.(1) SCR 358. Also see M/s Kanungo & Co. vs. Union of India, AIR 1972 SC 1236. This principle can be explained with the help of examples. Once it is shown that the accused was travelling without a ticket, prima facie case against him is proved. If he once had such a ticket and lost it, it will be for him to prove this fact within his special knowledge. Similarly, if a person is proved to be in recent possession of stolen goods, the prosecution would be deemed to have established the charge that he was either the thief or had received those stolen goods knowing them to be stolen. If his possession was innocent and lacked the requisite incriminating knowledge, then it will be for him to explain or establish those facts within his peculiar knowledge, failing which the prosecution would be entitled to take advantage of the presumption of fact arising against him, in discharging the burden of proof. Similar is the case when some fake invoices printed in the name of B are found in the possession of A and prosecution proceedings are commenced against A. Thus, the prosecution would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient, to raise a presumption in its favour with regard to the existence of fact sought to be proved.

  3. I have discussed the earlier law only with the intention to prove that it was not at all necessary to introduce a provision providing for reverse burden. Section 135 of the GST laws has now placed reverse burden on the accused. Thus, if A prints fake invoices in the name of B and circulates the same in the market without his knowledge then in the prosecution proceedings against B, the court shall presume the knowledge of this fact on B’s part. This is a draconian provision and the constitutionality thereof is required to be challenged more particularly because the investigation in our country is never fair. The constitutionality of the similar provision has been upheld by the Supreme Court in the case of Noor Aga vs. State of Punjab and Another (2008) 16 SCC 417. However, this judgement relates to the import of heroin and the law under consideration was Narcotic Drugs and Psychotropic Substances Act,1985.

  4. Even if the Court has upheld the constitutionality, Their Lordships have laid down certain principles, some of which would apply to all such enactments in India. The gist thereof is stated below:

    1. The procedures laid down in these provisions should be strictly complied with;

    2. The prosecution must first establish the basic facts. Placing persuasive burden on the accused persons must justify the loss of protection which would be suffered by the accused;

    3. The trial should be a fair trial;

    4. The accused should not suffer punishment on the basis of past experience;

    5. Considering the provisions, the heightened scrutiny test would be necessary to be applied;

    6. Suspicion, however high it may be, can under no circumstances, be held to be substitute for legal evidence;

    7. The provision, no doubt, raises presumption with regard to the culpable mental state on the part of the accused as also place burden of proof in this behalf on the accused, but presumption would operate in the trial of the accused only in the event the circumstances contained therein are fully satisfied. An initial burden exists upon the prosecution and only when it stands satisfied, would the legal burden shift. Even then, the standard of proof required for the accused to prove his innocence is not as high as that of the prosecution. Whereas the standard of proof required to prove the guilt of the accused on the prosecution is ‘beyond all reasonable doubts’ but it is, ‘preponderance of probability ‘on the accused. If the prosecution fails to prove the foundational facts so as to attract the rigours of the law, the guilt can’t be said to have been established;

    8. A confessional statement becomes relevant for the purpose of proving the truth of fact only when it is signed before the competent authority and made during the course of enquiry;

    9. Confessional statement is an evidence weak in nature;

    10. A retracted confessional statement may be relied upon but a rider must be attached thereto, namely, it is made voluntary. The burden of proving that such a statement was made voluntarily is on the prosecution.

(Principles stated in Para Nos. I to VII apply to Section 135 and from VIII to X apply to Section 136 of GST laws.)


  1. The law laid down by the apex court in the case of Vinod Solanki vs. Union of India, 2009 (13) STR 337as regards retraction of confessional statement is now required to be understood considering the reverse burden, as discussed above, and the observations of the Supreme Court in Noor Aga case.


  1. If the revenue relies on certain material against the assesse for the purpose of fastening the liability, it should provide the copies thereof to the assesse and if need be also the cross examination of the persons from whom such material was obtained. SeeVasanji Gela vs. The State of Maharashtra, (1977) 40 STC 544.See also the judgment of the Supreme Court in Yashwant Sinha vs. CBI, 2019 (25) GSTL (161). This judgement is under the RTI Act and has given new approach to the provisions of Evidence Act.


  1. Section 35(6) of the CGST states that the proper officer can determine the tax liability if there is discrepancy. It be noted that even in this provision it is only the onus of proof is involved and the same shall shift after proper explanation.

Transaction Value

  1. The transaction value declared by the assesse can’t be rejected on the basis of earlier transactions. The Revenue is required to adduce contemporaneous evidence to reject the value so declared. The burden of proof is on the revenue. See Commissioner of Customs, Mumbai vs. J. D. Orgochem Ltd. 2008 (226) ELT 9 SC.


  1. The burden of proving the correct entry or sub entry which would squarely cover the particular commodity is always on the Revenue. See H. P. L. Chemicals Ltd. vs. Commissioner of Central Excise, Chandigarh, 2006 (197) ELT 324, SC. However, it does not mean that the assesse should not lead any evidence. In fact, at the first available opportunity the assesse should submit entire relevant material before the authorities. The material will include the product composition, literature, label, character, expert’s opinion, user’s certificate etc. Such documents should be submitted even if it is felt that the product is covered by some judgment. The latest controversy relates to the classification of Hand Rub (Sanitiser). The claim is under C. H. No. 3004.90.87 wherein the tax rate is 6%. The entry reads as ,’ Antibacterial Formulation used as medicament for prophylactic or therapeutic use.’ The product Povidone Iodine Cleansing Solution which has been held as medicament by the Supreme Court in the case of Commissioner of C. E. vs. Wockhardt Life Science Ltd. 2012 (277) ELT (299)and the product Hand Rub have similar use. Both of them are for prevention of deceases. However, instead of only relying upon the judgment, evidence as aforesaid should be adduced.


  1. Onus of proof of fulfilment of conditions subject to which the exemption is granted under the Notification is always on the assesse or the claimant who claims the benefit under that Notification. See Collector of Customs Vs. Presto industries, 2001 (128) ELT 321 SC.

  2. Burden of Proof under the GST Laws is the vast subject. There is legal burden as well as evidentiary burden. I have made attempt to explain only a few of it’s kind.

Posted in May.

The Power to legislate a particular provision in a statute with a retrospective amendment is always available to the union or State legislatures. This power is a plenary power in respect of the fields that are demarcated to them and subject to constitutional restrictions and judicial review.

Passing a retrospective amendment after the courts have decided on an issue may be challenged on the ground that the retrospective legislature is void ab-initio. This statement is made by me because retrospective legislation is made by the Governments in order to see that the anomaly creeping in the Act is overcome by bringing an amendment, be that may, because of the decision of the courts or by a self realization or recognition.

Competence to make a law on a subject depending upon the circumstances and the competence to make that subject in the present law is always the Golden Metwand and needs to be considered when challenged.

The Hon’ble Courts have dealt with so many cases basing upon the situation that has come up before it and have held that whether a legislation giving a retrospective amendment is valid.

In particular in a taxing statute according to me retrospective legislation giving scope for levy of a higher rate of tax or giving scope for a section to fix the time limit to file a return or to file an appeal is the precise question.

In order to give a retrospective validation, the legislature may make a law which is in operation for a limited period of time prior to the date of the legislation giving retrospectivity.

By virtue of giving retrospectivity to the present legislation which is in force, would cease to be force, for the retrospective legislation would override the old legislation and would be treated as the legislation to be on the statute from the beginning of the introduction of the statute or from a date of the convenience as felt by the legislation.

It is my opinion that the legislation giving retrospectivity to a statue or a part thereof would be valid if the retrospectivity does not change the colours of the frontiers of a section – for example the rates of tax earlier mentioned in the schedules would be varying with a sequel addition to liability because of a retrospective legislation and the person or the dealer has obviously to pay the enhanced rate of tax on this particular subject. Then in indirect tax laws, as well known tax would be levied on a person and such tax has to be collected from the person who is paying the tax cannot be collected in better terms, I would say that the dealer would be acting as an agent on behalf of the principal. The principal herein is the Government and the dealer would be acting as an agent on behalf of the principal in collecting the taxes from the purchaser to makeover. By giving retrospectivity to a section or a schedule or a rule, Government would be demanding tax amount (i.e. enhanced rate) from the agent and the agent would be left with no other choice except to fulfill the demands and to pay the taxes from his own pockets as it would not be possible as also practicable to recover such enhanced amount in respect of concluded transactions.

The other aspect direct taxes and indirect tax laws by a retrospective amendment, tax would enhanced or a section would be given retrospectivity depending upon ratio decidendi or proposition of law in the judgements of the courts or a self realization that may come to the Government on a later date, which is also improper as in direct taxes, the person who has to pay the tax would be thrived with a higher tax by virtue of the retrospectivity that is given to a particular section or the rate of tax then it would be very difficult for the person who is paying the tax to pay the enhanced rate of tax or deduct the TDS at an enhanced rate followed by the interest and penalties which would be waived by the Government, it would lead to a difficult situation.

I have only canvassed the two examples in order to make my article more easily understandable. The challenge to these sections or schedules would be logical and would be appropriate also as the Government would be burdening the citizens with tax that may not be bearable by the citizens.

The power to make retrospective legislation enables the Government to amend the Act completely and to repeal the law as it existed before amending the Act. This power has also been often used for validating prior executive and legislative act for curing the defect which led to the invalidity of a particular provision or the Act.

The other example is, an Act which can be passed only by parliament but the State enacts the Act and when the Act is questioned before the Courts such act of the State would be set aside by the Courts. Then what is destined to follow is the question. Whether any retrospectivity can be possible in such cases. The answer is that parliament can legislate such Acts and parliament can retrospectively legislate such Act and such acts of the parliament are found to be valid. Please see the judgement in AIR 1996 SC 2560 in the case of P. Kannadasan Etc. vs. State Of Tamil Nadu & Ors.

Now the question is, can parliament legislate an Act which is already legislated by the State and in the case of taxes whether such Act can be considered as valid. My reply to such question would be the parliament can legislate such Act with retrospective amendment and as the consumer or the tax payer is paying the tax to the State, there would not be difficult for him as it would be between the State and the Center to adjust their accounts.

Now the question is whether statutes dealing with the substantive rights can be amended by retrospective legislation. Naturally every Statute would be considered prospective and it is the conditional principal of construction unless, it is expressly or by necessary implication made to have retrospective operation. Please see the case cited in AIR 1951 SC 128 in the case of Keshavan Madhava Menon vs The State Of Bombay.

The rule as general is applicable where the object of the Statute is to effect vested rights to impose new burdens or to impair existing obligations. The intention of the legislation to effect the vested rights or to effect the existing obligation should be clear with no ambiguity and then also it is deemed to be prospective only. This is because the fundamental principle behind an amendment is to curb or validate or to change the effective rights or the statutory rights and in the concept of taxation, the rate of tax etc., which shall be enforced by the legislature prospectively as it is for the citizen who would be burdened with the plenary action of curbing or effecting and taxing at a higher rate.

As a logical Corollary to general rule of retrospective operation is not taken to be intended unless that intention is manifested by express words or necessary implications, there is a subordinate rule to the effect that a statute or rule in a section in it is not be construed so as to have larger retrospective operation then its language renders necessary. Please see S. S. Gadgil, Income-Tax Officer, … vs. Lal And Company reported in AIR 1965 SC 171, AIR 1966 SC 1499 – Mohd. Idris & Others vs Sat Narain.

In other words, the word should be so clear and the language is vivid giving retrospectivity as intended by the parliament so that the courts can determine whether the retrospectivity is proper or not. If the retrospectivity intended by the parliament or State legislature in the literal reading of the provision gives an anomaly or absurdity, then prima facie such retrospectivity would be considered as illegal.

This rule of strict construction in the case of retrospective legislation would not be applicable in the case of procedural law. The Statute not dealing with substantive rights, but dealing with merely matters of procedure are presumed to be retrospective unless such construction is technically inadmissible. It does not apply to statutes which only, alter the form of procedure or the admissibility of evidence or the effect which the courts give to evidence. If the new Act effects procedure only then the retrospective operation would apply to the pending actions as well as future actions. See K. Eapen Chacko vs. The Provident Investment Company reported in AIR 1976 SC 2610.

A change in the forum should be considered as proper except in pending proceedings and therefore if a new Act requires certain types of original proceedings to be instituted before the special tribunals under the Act to exclude the civil courts, all the proceedings of that type whether based on old or new causes of action will have to be instituted before the Tribunal. See New India Insurance Co. Ltd vs. Smt. Shanti Misra, Adult – AIR 1976 SC 237.

So also in the case of arbitration on the same principle it can be said that an arbitration award made in a foreign country is enforceable as a convention award, if the foreign country is a party to the present dispute when proceedings for enforcing the award are taken although it was not such a party at that time of making the award.

The classification of a statute cannot necessarily be determined whether that statute as a retrospective operation where the operation is considered to be substantive or procedural. For example a statute of limitation is generally regarded as a procedural, but if the application to a past cause of the action is the effect of reviving or extinguishing right of suit , such an operation cannot be said to be procedural.

The language also cannot be treated as decisive rule deciding the retrospective legislation but at the same time it cannot be stated as an inflexible rule that use of present tense or present perfect tense is decisive of the matter that the statute does not draw upon post events for its operation. See the judgement in AIR 1961 SC 307 in the case of The State Of Maharashtra vs. Vishnu Ramchandra. Therefore the language cannot be found to decisive by the courts to hold a particular retrospective legislation to be invalid or valid.

The statutes in the case of succession which are given retrospective amendment have to be held as invalid because the statutes that are given retrospectivity for regulating succession should not applicable to succession, which had already opened as the effect will be to divest the estate from the person in whom it has vested. In Hindu law Inheritance Act 1921 it was held that in a case where the female heir died after coming into force of the Act though the male to whom she had succeeded has died prior to enforcement then by applying the retrospectivity it was not to deprive the person of the rights which are already vested in them for under the Hindu law of female heir, though a limited owner, fully represents the estate and the reversionars during her lifetime have no interest in it the words “dying intestate as used in the Act, were construed to me “in the case of intestacy of a Hindu Female” section 8 of the Hindu Succession Act 1956 which enacts the property of a male Hindu “dying intestate” shall devolve according to the provisions of the Act has been held to be inapplicable to a case where succession opened before the Act. But the same has been applied to a case of a Female limited owner who died after the Act although the male to whom she had succeeded had died prior to the Act. Succession in such a case opens again after the death of limited owner and to find out to whom are the heirs , who can succeed to the deceased male, the law in force at the time of the limited owners death has to be seen. See the case laws in the case of Eramma vs. Veerupana reported in AIR 1966 SC 1879 and Daya Singh (Dead) Through L.Rs. & … vs. Dhan Kaur reported in AIR 1974 SC 665.

Section 14 of the Hindu Succession Act 1956 which is enacted for the purpose that any property possessed by a female Hindu acquired whether before or after the Act shall be held by her as full owner thereof and not as a limited owner. The section is a retrospective one and the only qualification being that the Hindu Female should possess the estate at the time of the Act came into force. Having regard to the object of the section ameliorate the status of Hindu Female the word “possessed” has been construed in a broad sense so as to mean the state to owning or having anyone’s hand or power and to include actual constitutes possession. For the section have not been given a retrospective operation then what the language permits and therefore it has been held that if the Female Hindu had alienated the estate prior coming into force of the Act neither she or her alliance gets the right of full ownership under the Section. But if the alliance reconveys the property to a Hindu Female after commencement of the Act she would become full owner , she would then be possess the property acquired after act which is also covered by section 14(1). Therefore a widow losing her right to the property or right to maintenance, by virtue of which she was possessed of the property by her remarriage before the Act does not get the benefit of section 14(1). See the case of Gummalapura Taggina … vs. Setra Veeravva reported in AIR 1959 SC 577, Munnalal vs. Rajkumar, AIR 1962 SC 1493Munshi Singh vs. Sohan Bai (Dead) in AIR 1989 SC 1179Kalawatibai vs. Soiryabai And Others in AIR 1991 SC 1581Naresh Kutnari vs. Shakshi Lal (AIR 1999 SC 928)Jagannathan Pillai vs. Kunjithapadam Pillai & Ors in AIR 1987 SC 1493Velamuri Venkata Sivaprasad vs. Kothuri Venkateswarlu AIR 2000 SC 434Amireddi Rajagopala Rao And … vs. Amireddi Sitharamamma And Others in AIR 1965 SC 1970.

Coming to the fiscal statute, the general presumption is that when a retrospectivity is given to a statute in a whole or in part of the statute it would be generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of taxation law to be applied is the one which is in force in the assessment year unless otherwise provided expressly by necessary implication. As explained by me, a taxation statute cannot however be called retrospective if the taxes and events which are continuing or not complete when the amendment comes into force. A default which is a continuing default can be dealt with under the provisions of the new Act if it continues when the new act came into force though it has commenced when the old Act was in force.

A penal statue can be only considered to be prospective in operation as the offence would be taking much prior to the amendment brought in and that would lead to entrenching the civil rights of a party and so the civil obligation of a party and the criminal obligation of the party. Offence may be a civil offence or criminal offence converging the civil offence into criminal offence by a retrospective amendment would violate the civil rights and also enhancing the present period or enhancing the tax rate of penalty with a retrospective legislation would also effect the rights of the human being which would be definitely violative of articles 14, 19, 21 and also article 265 of the Constitution. As per article 20 of the constitution, to enact retrospective penal laws has no application of law, which only modifies the rigor of an existing penal law. Therefore Article 20 of the Constitution of India safeguards and protects the rights of an individual which cannot be taken away by a retrospective legislation.

Coming to the statutes prescribing posterior disqualification and past conduct which would hold to be bad in law when the statute imposes the penalty after commencement of the statute, then certainly retrospectivity would be held invalid as the offence has commenced before the retrospectivity of a statute. See the case law in AIR 1961 SC 307 in the case of The State Of Maharashtra vs. Vishnu Ramchandra.

Next comes is declarative status and the presumption against retrospective operation is not applicable to declaratory status. Here I would like to rely upon the statement of CRAIES and approved by the Supreme Court “for modern purpose declaratory Act may be defined as a Act to remove debts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing of declaratory Act is to set aside what parliament deems to have been judicial error whether statement of the common law or in the interpretation of statues. Usually, if not invariably such an act contains preamble and also the word “it is declared as well as the word ‘enacted’”. The use of the words ‘it is declared’ is not conclusive then the Act is declaratory for these words, may yet times used to introduced new rules of law as the Act in the later case will only be amending the law and will not necessarily be retrospective.

It is well settled that if a statue is curative or merely declaratory of the previous law of retrospective operation is generally intended.

In the absence of clear words indicating that the amending Act is declaratory it would not be so construed when the pre amended provision was clear and unambiguous. An amendment Act may be purely clarificatory and a clear meaning of provision of the principal Act which would already implicit, clarificatory amendment of this nature will have retrospective effective and therefore the principal Act which was existing law then Amending Act also will be the part of the existing law. The judgements of Keshavlal Jethalal Shah vs. Mohanlal Bhagwandas & Anr reported in AIR 1968 SC 1336K. Govindam & Sons vs. CIT reported in AIR 2001 SC 254, M/S. Birla Cement Works vs The Central Board Of Direct Taxes reported in AIR 2001 SC 1080 where it was held that mere addition of an explanation by an amending Act in a taxing Act cannot, without more be held to be clarificatory and retrospective. In Commissioner of Income tax, Bhopal vs. M/S. Shelly Products And Another reported in 2003(5) SCC 461, it was held that provisos (a) and (b) added in section 240 of Income Tax Act 1961 by amending Act which came into force on 01-04-1989 were held to be clarificatory and retrospective. See also Chennan Singh vs. Jai Kaur reported in AIR 1970 SC 349Commissioner Of Income-Tax, … vs. M/S. Straw Products Ltd.Bhopal reported in AIR 1966 SC 1113Union of India & Ors vs. S. Muthyam Reddy reported in 1999(7) SCC 545Punjab Traders vs. State of Punjab Traders reported in 1991 (1) SCC 86R. Rajagopal Reddy *(Dead) by L.Rs vs. Padmini Chandrashekaran (Deal) by L.Rs reported in 1995 (1) Scale 692, Allied Motors (P) Ltd vs. Commissioner Of Income-Tax, reported in AIR 1997 SC 1361. So any amendment unless it has the nature of a clarification cannot be construed as valid when it is given retrospective amendment and any retrospectivity cannot be held to be valid if it is not in the nature of a clarification, or giving a meaning by interpreting the section.

Coming to the statues dealing with the appeal it has been held that the right of entering a superior court and invoking its aid and interposition to redress an error of the court below and though procedure does scored an appeal the Central idea is the right this has been held by the Full Bench of Nagpur High Court led by Mohammad Hidayatullah as his Lordships was sitting.

The right of appeal has been recognized as a right which vests in the party who is initiating the original proceedings. Any charge in law after initiation of law would be held to be not applicable to the appeal and law should be declared as prospective in operation only. For example an amendment has been brought by the Andhra Pradesh Government in the Sales Tax Act in 2001 i.e. 30-11-2001 whereby the appeal has to be filed by paying 12.5% or 25% or 50% when filed before the Tribunal such Act was held to be prospective only and should confine the law to be applicable for the appeals that would be filed from the year 2004 onwards.

But an amendment was also brought in 1995 to the appeals to be filed within 30 days and further period of 30 days to be condoned by the appellate authority and 60d ays further period of 60 days if the appeal has to be filed before the Tribunal and such amendment was held to be retrospective in operation, means the appeals though they belong to the previous years, the amendment that was brought in the year 1995 would be applicable, if the appeal is filed in or after 1995.

Therefore retrospective operation in the case of appeals has to be strictly and stringently followed.

Now coming to the recent amendment that was brought by the Union of India to the GST Act by amending retrospectively section 140 r/w section 148 because of the Delhi High Court decision in the case of Reliance Electric Works vs. Union of India where Delhi High Court has said that the time limit of three years as per the Limitation Act was applicable to claim the benefit of transitional relief and the time limit would be applicable till 30th June 2020 as the section of the statute dealing with the transitional credit does not specify any time limit but it is only the rule 117 that prescribes the time limit which is extended from time to time.

According to me with great respect to the Union as also to the Delhi High Court, the section need not be amended when once in the Act the word prescribed is defined and to be referred by the rules etc., the rule 117 prescribing the time limit for filing the Tran-1 which was subsequently extended of various reasons of technical glitches, there is no requirement for any amendment to the statute or the section with great respect to the judgement of the Delhi High Court, article -300A cannot be made applicable or imposed into the fiscal statute which prescribes that the applicability of civil laws are ousted, cannot be made applicable and in my considered opinion the Union ought not to have amended section 140 giving a retrospectivity and the Delhi High Court with great respect should not have declared that article 300A which is a civil right has an application for the reason that giving input tax credit is the sole right of the union or the state and it is only the mercy of the union or the State to give the input tax credit.

With these I conclude my article on the retrospective legislation and hope that this article throws some light and would edify and enlighten the youngster generations.

|| Jai Hind ||

Posted in May.

I. Erstwhile Service Tax provision and VAT laws

Service tax provision

Under the erstwhile service tax provisions (Finance Act, 1994) Rule 6(3), a service provider could take credit of excess service tax paid if the refund was given to the person from whom the payment was received or by issuance of a credit note. A credit note under the service tax provisions could be issued under the following circumstances:

  1. Invoice has been issued or payment has been received against a service to be provided which is not so provided either wholly or partially for any reason;

  2. Where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract.

There was no time limit prescribed within which credit note had to be issued under the service tax provisions. Support can be drawn from the following case laws

  1. Aakash The Palace To Celebrate 2013 (31) S.T.R. 251 (Tri. – Ahmd.)

  2. Central Mine Planning and Design Institute Ltd. 2014 (36) S.T.R. 328 (Tri. – Del.)

State Value Added Tax Law

The issue relating to issuance of credit notes under the erstwhile State Value Added Tax laws (for brevity, ‘VAT laws’) was contentious. Under the erstwhile VAT laws credit notes could be issued under the following circumstances:

  1. Sales return if the goods are returned within 6 months of date of sale or date of delivery of goods (State specific);

  2. Post sales discount with certain conditions which varied from State to State.

The issue relating to deduction from total turnover in respect of post-sale discounts given through credit note under the Karnataka VAT Act, 2003 in the case of Southern Motors vs. State of Karnataka 2017 (1) TMI 958 – Supreme Court was held as an eligible deduction

“the requirement of reference of the discount in the tax invoice or bill of sale to qualify it for deduction has to be construed in relation to the transaction resulting in the final sale/purchase price and not limited to the original sale sans the trade discount. However, the transactions allowing discount have to be proved on the basis of contemporaneous records and the final sale price after deducting the trade discount must mandatorily be reflected in the accounts as stipulated under Rule 3(2)(c) of the Rules. The sale/purchase price has to be adjudged on a combined consideration of the tax invoice or bill of sale as the case may be along with the accounts reflecting the trade discount and the actual price paid.”

In the case of IFB Industries Ltd 2012 (3) TMI 66 – Supreme Court, the Hon’ble Apex Court held as follows

“Kerala General Sales Tax Rules, 1963 – allowability of discount provided vide credit notes under rule 9(a) – Revenue contended that discount to qualify for exemption must be shown in the invoice itself – Held that:- We find nothing in rule 9(a) to read it in the restrictive manner to mean that a discount in order to qualify for exemption under its provision must be shown in the invoice itself. It is significant to note that the rule stipulates that the discount must be shown in the accounts.”

II. Central Goods and Services Tax Act, 2017 (CGST Act, 2017)

  1. Credit note:Credit note is defined under Section 2 (37) of the CGST Act, 2017 to mean a document issued by a registered person under Section 34 (1) of the CGST Act, 2017.

  2. Issuance of credit note:Section 34 (1) of the CGST Act, 2017 provides that a registered person can issue one or more credit notes where one or more tax invoices have been issued for supply of goods or services or both in a financial year under the following circumstances:

    1. “Taxable value” or “tax charged” in a tax invoice is found to exceed the taxable value or tax payable in respect of supply effected.

    2. Goods supplied are returned by the recipient.

    3. Goods or services or both supplied are found to be deficient.

    Section 34(1) of the CGST Act, 2017 makes it mandatory that every credit note must be inextricably linked with an underlying tax invoice/tax invoices issued for “such supply”. Under the GST law, Section 34 of the CGST Act, 2017 also makes it abundantly clear that a credit note (or a debit note) can be issued only by the supplier (registered person) who has issued tax invoice/s. Credit note or debit note issued by recipient of supply of goods or service do not carry any legal support as far as GST law is concerned.

    Section 34 of the CGST Act, 2017 does not mention the phrase ‘post supply discount’ for issuance of credit note. A question arises as to whether a credit note can be issued for post supply discount, in case where “post supply discount” fulfills the conditions specified under section 15(3) (b) of the CGST Act, 2017. In this context the author’s view is that the post supply discount will fall under the phrase ‘taxable value or tax charged in a tax invoice is found to exceed the taxable value or tax payable in respect of supply effected’ and thus issuance of credit note in case of post supply discount is possible (only upon satisfying conditions prescribed under Section 15(3) (b) of the CGST Act, 2017).

  3. Additional conditions:As per Section 34(2) following conditions are to be followed where credit note is issued in relation to supply of goods or services or both:

    1. All the credit notes issued during a month should be declared in the return (currently Form GSTR 3B and Form GSTR 1)

    2. Credit note/s for a financial year cannot be issued later than September following the end of the financial year in which the supply of goods or services or both is made. For instance, credit note in respect of supply made during the financial year 2018-19 can be issued not later than September 2019. The time limit is linked with “time of supply” which may not necessarily coincide with “date of tax invoice”, hence, one has to be careful with regard to “time of supply” against which credit note is required to be issued.

  4. Post supply discount: Section 15 (3) (b) of the CGST Act, 2017 provides that value of supply shall not include discount given after supply is effected, if the following conditions are fulfilled:

    1. Discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

    2. Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

    In case of post supply discount as discussed supra, a credit note can be issued.

    The condition in Section 15 (3) (b) (ii) of the CGST Act, 2017 requiring the ‘supplier to ensure that input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply’ appears to be very onerous on the supplier. In this context the analogy of the judgement of the Hon’ble Andhra Pradesh Court in the case of Media Communications (1997) 105 STC 227 (AP) is useful for discussion. In this case one of the question raised was whether the requirement under Section 12(2)(b) of the Andhra Pradesh General Sales Tax Act, 1957 for contractor to prove that the turnover of the sub-contractor was included in the return of turnover filed by the sub-contractor to claim deduction from the turnover was valid; the Hon’ble High Court held as follows

    “In the present case also once it is found that a sub-contractor is compulsorily registrable, we fail to see any further purpose in requiring the contractor to prove that the turnover of the sub-contractor was included in the return of turnover filed by the sub-contractor. That information will be only with the sub-contractor and it could also be easily verified from the records of the taxing authority since the sub-contractor is registered and his registration number will be known. To require that the contractor should also show that the sub-contractor’s turnover was returned by the sub-contractor appears to be an unreasonable burden on the contractor. We are, therefore, of the opinion that the words “and that the turnover of such amount is included in the return of turnover filed by the sub-contractor” must be struck down as unreasonable”.

Based on the analogy of the above judgement, whether the conditions imposed in Section 15 (3) (b) (ii) of the CGST Act, 2017 (i.e. requiring the supplier to ensure that input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply) will hold the test of law will have to watched. Further, in author’s view, supplier issuing credit note can take support that he has uploaded the credit note/s in Form GSTR1 and to that extent it would get displayed in Form GSTR 2A of the recipient which would be sufficient compliance under Section 15(3) (b) (ii) of the CGST Act, 2017.

Further, it would be relevant to the note the Advance Ruling in the case of Ultratech Cement Limited 2018 (7) TMI 1761 – Authority for Advance Rulings Maharashtra in the aspect of the condition laid down in Section 15(3)(b) ‘discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices’; in this ruling the Hon’ble Authority held as follows

“The discount from the value of supply can be allowed only if discount is in compliance of the provisions of Section 15(3) of the CGST Act, 2017 – the discount that is given after the goods have been sold has to be established in terms of the agreement entered into at or before such supply i.e. the discount that is to be given afterwards has to be mentioned in the terms of the agreement or the criteria for arriving at the quantum or percentage of discount has to be given in the terms of the agreement which is entered into at or before such supply.

The wordings of Section 15 (3) (b) (i) very clearly states that quantum of discount is given after the supply of goods has taken place has to be there in the terms of such agreement i.e. it cannot be open ended not based on any criteria. Thus, this discount quantum cannot be arrived at without any basis only at the discretion of the supplier. The supplier has to clearly mention the quantum of discount or percentage of discount which is to be worked out on the basis of certain parameters or certain criteria which may be agreed to between the supplier and the recipient and which are predetermined and mentioned in agreement in respect of supply of the goods.”

  1. Contents of credit note: A credit note to be issued under Section 34 of the CGST Act, 2017 should contain all 15 particulars prescribed in Rule 53(1A) of the CGST Rules, 2017.

  2. Single credit note with multiple invoice numbers: During the implementation of GST law, a separate credit note had to be issued for each invoice. Vide Notification No. 03/2019 – Central Tax dated 29.01.2019 effective 01.02.2019, a single credit note with multiple invoice numbers can be issued. However, as on date, to the best of author’s knowledge the online facility for filing the application Form GSTR 1 does not provide the option of linking a single credit note with multiple invoices. Thus, until this facility is activated on the GST portal, it would be prudent to issue a separate credit note for each invoice.

  3. Some issues on credit notes

    1. Goods supplied during a financial year are returned after September following the end of the financial year (for instance, goods supplied on February 14, 2019 are returned on December 15, 2019). Can a credit note be issued in terms of Section 34 of the CGST Act, 2017?

      A credit note under Section 34 of the CGST Act, 2017 in the instant case cannot be issued. However, a credit note under the normal accounting principles without the tax (CGST/SGST or IGST as the case maybe) can be issued. Reconciliation statement in Form GSTR 9C Table 5J requires disclosure of ‘Credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST’.

    2. A recipient of service denies to pay to the supplier of services who has issued a tax invoice. The service has been provided by the supplier wholly without any deficiency in service deliverables. As the service recipient has denied the payment, the service provider has decided to write off the said tax invoice (or even a part of the tax invoice). Can the service provider issue a credit in terms of Section 34 of the CGST Act, 2017?

      Credit note for service can be issued if there is deficiency in provisions of service. In the instant case as the service provided are not deficient, credit note under Section 34 of the CGST Act, 2017 cannot be issued.

    3. Whether credit note can be issued under Section 34 of the CGST Act, 2017 even if the conditions laid down in Section 15(3) (b) of the CGST Act, 2017 are not fulfilled?

      Circular No. 92/11/2019-GSTdated 07.03.2019 in para 2(D) (iii) has clarified that ‘financial / commercial credit note(s) can be issued by the supplier even if the conditions mentioned in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties.’

In conclusion, while issuing a credit note under Section 34 of the CGST Act, 2017 abundant caution is to be taken and ensure that all the conditions are adhered as prescribed in GST law.

An attempt has been made in this article to make a reader understand the basics of Credit Note under the GST law. This article is written with a view to incite the thoughts of a reader who could have different views of interpretation. Disparity in views, would only result in better understanding of the underlying principles of law and lead to a healthy debate or discussion. The views written in this article is as on May 12, 2020

Posted in May.

In the light of COVID-19 pandemic and the difficulties being faced by the taxpayers, there have been a few relaxations provided by the Government mainly with respect to filing of Returns in FORM GSTR-1, FORM GSTR-3B for the period commencing from February, 2020 till May, 2020. Due date for Annual returns and reconciliation statement for the financial year 2018-19 has also been extended till 30th June, 2020. Late fee is waived for delayed filing of the Annual return and the Reconciliation Statement for financial year 2017-18 and 2018-19 for taxpayers with aggregate turnover less than ₹ 2 crores.

Sub-Rule (2) of Rule 31A has been substituted by way of CGST (Second Amendment) Rules, 2020 whereby the value of supply of lottery tickets has been deemed as 100/128 of the face value of the ticket or the price notified by the organising state, whichever is higher. Certain relaxation is also offered to the Airline Companies where they have been exempted from filing reconciliation statement in FORM GSTR-9C u/s. 44 (2) of the Act r.w. Rule 80(3) of the Rules thereof. The conditions of exemption are as follows:

  1. It is a Foreign airlines company

  2. Covered under Notification issued u/s. 381(1) of Companies Act, 2013

  3. Who have complied with Rule 4(2) of the Companies (Registration of Foreign Companies) Rules, 2014

A Statement of receipts and payments for the F.Y. w.r.t Indian business operations duly authenticated by a Chartered Accountant in India or a firm or a LLP of practising CAs be submitted for each GSTIN by 30th September of the year succeeding the F.Y.

CGST Rules, 2017 amended from time to time have in their recent amendments substituted Rule 25 of the CGST Rules by way of Notification No. 16/2020-Central Tax dated 23.03.2020 which is published on and applicable from 23.03.2020. The said Rule mandates physical verification of the business premises in case of failure of Aadhaar authentication before grant of registration or any other reason which the officer deems fit post registration. Verification Report, Photographs and other documents are to be uploaded on the Portal in FORM REG-30 within 15 working days of such verification. However, the requirement of authenticating Aadhaar Number for registration is not applicable to:

  1. A person is not a citizen of India;

  2. Class of persons other than:

    1. Individual

    2. Authorized signatory of all types

    3. Managing & Authorized partners;

    4. Karta of HUF

However, if Aadhaar is not assigned to a person then other modes of authentication are to be offered as per Rule 9. Therefore, only Individuals, Authorized signatories, managing and authorized partners and karta of HUF are required to get authentication done.

Notification No. 30/2020-Central Tax increased the time limit to opt for Composition Scheme. Any Registered person who wants to opt for Composition Scheme under section 10 of CGST Act, 2017 for the year 2020-21 can file intimation electronically in form GST CMP-02 till 30th June, 2020 (Subject to Conditions). Form GST ITC 03 in accordance with the provisions of sub-rule (4) of rule 44 can be filed till 31st July, 2020.

Considering the lock down situation, the Government has relaxed the provisions of Rule 36(4). Therefore, for the GST returns relating to periods from February 2020 to August 2020, ITC as per Books can be claimed without considering the ITC as per GSTR 2A. However, the ITC claimed has to be matched in a cumulative manner with GSTR 2A before filing GSTR 3B of September 2020 with restrictions of Rule 36(4).

Notification No. 34/2020-Central Tax has provided for some key benefits to Compositions Dealers. The statement of details of payment of Self Assessed tax in form GST CMP-08 for January – March, 2020 Quarter can be submitted upto 07.07.2020. The return in form GSTR-4 for FY 2019-20 can be submitted upto 15.07.2020. Other benefits have also been given which are given in the Notification in detail.

The validity of E-Way bill expiring between 20.03.2020 to 15.04.2020 was extended till 30.04.2020. Time period for filing of returns for persons required to deduct tax at source, Input Service Distributors and Non-resident taxable persons for the Month March, 2020 to May,2020 upto 30.06.2020.

Taxpayers required to Collect TCS under Section 52 can furnish statement of Month March, 2020 to May, 2020 upto 30.06.2020. Time limit extended upto 30.06.2020 for various compliances including Notices except for certain provisions. One can refer Notification No. 35/2020-Central Tax for further details.

The Government has further clarified certain issues by way of Circular No. 135/05/2020-GST dated 31.03.2020. They are stated as under:

  1. There are no restrictions on clubbing of tax periods across Financial years for claiming refund. Circular No. 125/44/2019-GST dated 18.11.2019 was modified to that extent i.e. the restriction on bunching of refund claims across financial years shall not apply in light of the decision of the Hon’ble Delhi High Court in the case of M/s Pitambra Books Pvt Ltd. The court held as under:

“Circulars can supplant but not supplement the law. Circulars might mitigate rigours of law by granting administrative relief beyond relevant provisions of the statute, however, Central Government is not empowered to withdraw benefits or impose stricter conditions than postulated by the law.”

  1. Refund of tax paid on supplies other than zero rated supplies. Refund is admissible proportionately in the respective original mode of payment In cases of refund, where the tax to be refunded has been paid by debiting both electronic cash and credit ledgers (other than the refund of tax paid on zero-rated supplies or deemed export), The refund to be paid in cash and credit shall be calculated in the same proportion in which the cash and credit ledger has been debited for discharging the total tax liability for the relevant period for which application for refund has been filed. Such amount shall be paid by issuance of order in FORM GST RFD-06 for amount refundable in cash and FORM GST PMT-03 to re-credit the amount attributable to credit as ITC in the electronic credit ledger.

  2. Refunds of Input Tax Credit under Section 54(3) of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019 is modified to that extent.

  3. New Requirement is introduced to mention HSN/SAC in Annexure ‘B’. The applicant is now required to mention HSN/SAC code also which is mentioned on the inward invoices. A distinction is important in view of the provisions relating to refund where refund of credit on Capital goods and/or services is not permissible in certain cases.

Clause (C) of Rule 89(4) has also been substituted recently. Clause (C) defines “Turnover of zero-rated supply of goods”. The Old Provision was as under:

means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;

The New Provision stands as follows:

means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both

The new definition of “Turnover of zero-rated supply of goods” restricts the value of goods up to 1.5 times of the value of similar goods when supplied locally / domestically by the same supplier / similarly situated supplier.

A new Rule 96B has also been introduced requiring the taxpayer to return the refund of unutilised ITC claimed on goods exported where export proceeds are not realised within a time period of specified under FEMA. Amount is to be paid within 30 days from expiry of the said period. If not, then recovery proceedings are initiated under Section 73 or 74 of CGST Act, 2017.

The Government has introduced special procedure under Section 148 of CGST Act, 2017 for Corporate Debtors undergoing special CIRP (Corporate Insolvency Resolution Process) under IBC and management of whose affairs are being undertaken by IRP (Insolvency Resolution Professional). Notification No. 11/2020-Central tax dt. 21.03.2020 was introduced in this regard. Corporate debtor undergoing CIRP shall, from the date of appointment of IRP/RP be treated as DISTINCT PERSON.

Registration is to be taken within 30 days from the date of appointment of IRP/RP. They are required to take registration in each state / UT where the Corporate Debtor was registered earlier. Where RP appointed before Notification, Registration is to be taken within 30 days from commencement of Notification. Registration of Entity undergoing CIRP is not to be cancelled. In case it is cancelled, it should be revoked in case cancellation is within period of revocation of cancellation.

IRP / RP are under an obligation to comply with legal requirements for period after the Insolvency commencement Date. They are not obligated to file returns for pre-CIRP period. First Return is to be filed u/s. 40 of CGST Act, 2017 for the period beginning from the date it became liable to take registration till the date registration has been granted.

IRP/RP are eligible to take inputs on Invoices covering supply of goods / services or both received since appointment of IRP/RP but using the GTSIN of erstwhile Registered person, subject to conditions of Chapter V of the Act, except the provisions of Section 16(4) and Rule 36(4).

ITC by customer of undergoing CIRP: for the period from the date of appointment of IRP/RP till the date of registration or 30 days from the date of Notification, whichever is earlier, a customer shall be eligible to obtain ITC on invoices issued under GSTIN of erstwhile registered person subject to Chapter V of the Act except Rule 36(4).

The amount deposited by IRP / RP in the Electronic Cash Ledger of existing registration from the date of appointment to the date of Notification, shall be available for Refund to erstwhile registration even though Returns for that period has not been filed.

It is important to note here that no coercive action is to be taken against corporate debtor w.r.t. dues prior to insolvency commencement. Such dues are to be treated as “Operational dues”. The said claim is to be filed by the officer before NCLT. Details of supplies made / received and total tax dues pending is to be taken from corporate debtor and to be filed before NCLT. Section 14 of IBC mandates imposition of moratorium period.

These were the few Notifications and Circulars issued for the ease of business and help the taxpayers in these testing times.

Posted in May.

There will hopefully come a time where the battered and bruised population of the world will one day look back to fathom what really hit them. Reminiscing about the same whenever that occurs will help us understand the true accuracy of several semi speculative articles written by us. This is more so pertinent in the professional lives of lawyers, CAs, and tax consultants who have very known the imaginative interpretative powers of the Department.

Whereas people and communities from different walks of life are affected in many diverse ways. We are here to discuss the issues of Covid 19 lockdown from the point of view of the indirect tax consultants which includes a gamut of activities from accounting, returns,assessments, compliances, appeals, and pending litigation etc.

The crux of the matter is fairly simple. Since mid March 2020, there has been a near cessation of activity barring essential supply and services which can be provided from home without any physical interference. Since the nature of supply under GST is essentially a two party transaction , it is obvious that most affected one transactions will be the ones germinating out of continuous contracts or contracts expiring or covering the duration of lockdown. There will invariably be an adverse impact on the transaction itself alongwith taxability, compliance and limitation challenges.

This article is predominantly attempting to illustratively discuss certain legal issues arising out of contracts viz a viz Force Majeure clauses, rescission, amendments and in some cases novation. I wish to point out that, an extremely detailed and insightful article on force majeure earlier by Mr. Siddharth Ranka, Advocate.

It is fairly accurate presumption that for the first 3 National Lockdowns and even the 4th as far as big cities are concerned, the disruption in Supply and ongoing contracts were immense. Whereas the immediate consequence of such a lockdown would be that, certain contracts may or may not be honoured or the time of delivery may be massively delayed.

Discussion on various aspects related to changes in performance of a Contract and its impact on GST taxability.

Section 62 of the Indian Contract Act 1872 is reproduced herewith

Effect of novation, rescission, and alteration of contract.— If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. — 000 If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” Illustrations

(a) A owes money to B under a contract. It is agreed between A, B and C, that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted. (a) A owes money to B under a contract. It is agreed between A, B and C, that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.”

(b) A owes B 10,000 rupees. A enters into an agreement with B, and gives B a mortgage of his (A’s), estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old. (b) A owes B 10,000 rupees. A enters into an agreement with B, and gives B a mortgage of his (A’s), estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.”

(c) A owes B 1,000 rupees under a contract, B owes C 1,000 rupees, B orders A to credit C with 1,000 rupees in his books, but C does not assent to the agreement. B still owes C 1,000 rupees, and no new contract has been entered into. (c) A owes B 1,000 rupees under a contract, B owes C 1,000 rupees, B orders A to credit C with 1,000 rupees in his books, but C does not assent to the agreement. B still owes C 1,000 rupees, and no new contract has been entered into.”

Although the above section deals primarily with discharge of a contract, it is important to discuss the same owing to the fact, that any transaction under the GST Act which is taxable is a species of the contract.


Novation in essence means that the parties to a contract mutually consent to substitute/novate the original contract with a new one. Resultantly the terms and conditions of supply as per the original contract will cease to exist along with its rights and obligations and the same is replaced with a new contract which is activated with the new terms and conditions as per the contract.

Novation usually requires 3 parties, the third party is the counter party which takes over the obligations and rights. From the GST purview, this would usually happen in case of Supplies which requires a chain of Contract or bigger turn key projects. In several cases, contractors which are now faced with either financial distress or lack of labour; may with the consent of the employer, replace themselves with another contract or change certain approved vendors/sub contractors with the consent of the Employer. During novation, the original agreement would cease and new agreement will come into force. There can be no novation if the earlier contract in any manner survives even after the new agreement comes in force.

As regards GST, as per Section 9 of the CGST Act, tax is payable on supply. Hence for the supplies made under the original agreement shall remain taxable in the hands of the supplier only. It is only for supplies which happen as per the replaced contract, the taxability shall change as per the revised terms and conditions.

As far as novation is concerned, that happens even in the due course of business and hence from the point of view of GST there is no significant change in such cases during the Covid-19 lockdown period.

Alteration/ amendment of Contracts

The difference between Novation and amendment of a contract is that in case of Novation, entire contract is substituted or replaces with a new contract. In cases of alteration/ amendment is that there is no de novo contract as a result of amendment. Certain terms and conditions are changed and rest of the terms and conditions remain the same.

In terms of disruption of business and supply chains due to nation wide lockdown, the mechanisms adopted by most businesses will be amendment of existing contracts.

The reasons for the above are purely commercial and market driven. Due to the lockdown atleast in the initial phases, there was an immediate cessation of all activities and most of it for no fault of either the supplier or the recipient. Only very few supplies and businesses remained unaffected to an extent, they were namely, those involved in the supply of essential commodities, pharmaceuticals, and certain services which were possible to be provided remotely.

Some of the examples of major disruptions are mentioned herein below:

  1. Commercial rent agreements, which the tenant who is specifically forbided by law to work from the premises, may not be able to afford and request for reduction, differing , waiving off the rent during the covid period and beyond.

  2. Perishable goods received by a distributor after an extended period largely due to trucks halted mid way and not allowed inter state travel.

  3. Goods sent for job work and whether approval period of six months to exclude lockdown period

  4. Goods in transit for export goods lying at the port of dispatch.

Although, Price reduction, discounting or waiver are all valid under the GST Act, the scenario like a lockdown is not envisaged under any commercial tax acts and therefore it is important to examine the vagaries from the purview of the Contract Act jointly with the GST implications of it.

Section 7 of the CGST Act clearly states that all kinds of supplies which includes sale, transfer, rental,lease, disposal etc made or agreed to be made for a consideration . Hence it is trite to say that Section 7 by using words made or agreed to be made, puts a notable emphasis on the Agreement between the two parties. Furthermore for any transaction there has to be a consideration which can be taxed. Consideration is something which is determined by both the parties to a contract qua the transactions.

It is also clear, that not all Contracts have clauses which explicitly covers unprecedented scenarios like a covid lockdown and therefore amendments of contract is going to be a norm.

Taking a brief overview of the examples, it is safe to say that. the consideration or rent is usually mentioned in the agreement for a fixed duration. Therefore would it be possible for the land lord to now either waive off the charges or offer reduced rent.

In the considered view of this Author, the reply to the above poser is absolutely affirmative. The agreement merely indicates a consent of the two parties with regards to a certain consideration. Ofcourse the tax event is not solely dependant on the Contract. The taxability , time and place of supply is determined as per the GST law. That being said a contract is important to understand the intention of both the parties and the consideration for such supplies.

A contract can be amended with the consent of both the parties as per Section 62 of the Indian Contract Act. The problem that may arise at the time of assessment, wherein the Department may insist that there has been deliberate under invoicing by the parties to the contract. The only way to avoid doubts would be to have an express written communication by official email, wherein the revised terms including reduction in prices are expressed in clear terms.

Consideration between two parties be it distinct or related, is primarily based on the free market value of a particular supply. Free market value of any product during the lock down and post it will also be affected by supply and storage redundancies and also demand fluctuations. Hence even for related party transaction the consideration which is to be determined as per the open market value Rule 27(a), they will have to take into consideration the peculiar constraints and conditions under which the supplies are effected and it will be difficult to have an omnibus market value for several supplies.

As held by M/S. Ratna Commercial … vs. Vasu Tech Ltd. & Ors. on 26 November, 2009, the Delhi High Court has stated that:

Section 62 is based upon the principle that a contract is the outcome of a mutual agreement and it is equally open to the parties to mutually agree to bring the said contract to an end, enter into a new contract or modify the earlier contract. Contractual obligations can be modified by mutual consent. Parties can vary the terms of the contract and absolve a party from the original obligations. Once Section 62 of the Contract Act applies, parties are bound by the terms and conditions mentioned in the second contract or the amended terms and not by the first contract. Breach of the subsequent contract will not revive the original contract, unless intention of the parties is to the contrary. The question is of intention of the parties, when they enter into second contract or modify earlier terms… emphasis supplied.

The other factor which needs to be considered is in relation to the status of invoices which are already raised for the month of March in April. This was raised as per regular rates. Subsequently, due to loss of business or an impending extension of the lockdown, it might be possible that, either the supplier or recipient may suo moto offer or with mutual negotiations agree to either price reduction or a waiver. In such a case from the GST point of view, a credit note which will have to issued by the supplier as per Section 34. The first condition i.e. credit note can be issued where the value of taxable supply charged in the invoice, exceeds the taxable value, would cover a reduction or redetermination of the taxable value in the present scenario.

Whether such a determination of price or reduction is a discount?

The only real issue herein is whether,such a price reduction can be a post invoice event. It must be noted that, the price reduction or reduction in consideration payable as discussed herein below is not in the colour of discount.

If it is presumed that any revision is a discount in that case, Section 15(3)(b)(i), clearly states that a discount can be offered after raising of invoice as long as there is an agreement entered into before or at the time of the supply. Since such a lockdown scenario may never have been contemplated, in that case the erroneous presumption of the same being called a discount will render most determination of prices invalid even if there is unanimous consent for the same from both parties.

In any case, under normal conditions, 15(3)(b)(i) covers only discounts like trade discounts and other type of discounts which are incorporated in the Contracts. That being said, there is always a clause, that any price revision of a supply can be done after mutual consent of both the parties involved.

In case of the Covid lockdown, most supplies like rent and other such services are not availed or provided for at all due to a Central Act i.e Disaster Management Act and Epidemic Act which forbided any movement to the premises or in case of other services sudden cessation of any activity. Therefore in such a scenario the two parties to a contract are infact re determining the consideration and the reduction infact does not take colour of a discount. A discount can be largely classified as an incentive , whereas in the covid scenario, where a Central act is itself forbidding an activity, the transactions are sought to be priced after re determining the entire consideration and not offered as any incentive. Therefore merely because a contract mentions certain amounts, one cannot say that the amount becomes payable.

The Consideration receivable being an income, in the hands of the supplier, when is the income actually accrued and hence taxable.

In State Bank of Travancore vs. CIT [1986] 24 Taxman 337 (SC), the observations of the larger bench of the SC are very important:

….accrual is a matter of substance and that it is to be decided on commercial principles having regard to the business character of the transactions and the realities and specialities of the situation and cannot be determined by adopting purely theoretical or doctrinaire or legalistic approach. If, therefore, for the purpose of determining whether there has been accrual of real income or not regard is to be had to the business character of the transactions and the realities and specialities of the situation in preference to theoretical, doctrinaire, or legalistic approach I fail to appreciate why interest on sticky loans, which has theoretically accrued but has not factually resulted or materialised at all to an assessee during the accounting year, should not be regarded as hypothetical income and not real income?”.. emphasis supplied

The above mentioned judgment clearly states that commercial realities have to be taken into account before determining whether an income is accrued or not. Therefore merely raising an invoice may in ordinary course of business make a transaction taxable, but when the commercial conditions have changed to such a drastic levels that, either the supply is highly delayed or disallowed due to the Central Disaster Managerment Act, one cannot take a simplistic argument about the consideration mentioned in any invoice becoming taxable merely because the same is raised in the invoice. The amount payable or the consideration can be redetermined in the light of the drastic changes in situations.

In another case while discussing retrospective enhancement of rent , the Hon’ble Supreme Court has made several observations which clearly lays down the principle discussed above, although in this case, there will in most cases always be a post facto reduction of rent or for that matter any other consideration for all kinds of supply. In P. G. & W. Sawoo v. Assistant Commissioner of Income-tax [2016] 69 taxmann.com 188 (SC) it was held that :

  1. To controvert the aforesaid contention on behalf of the appellant-assessee the respondent-Revenue contends before us that the enhancement of rent is retrospective i.e. from 01.09.1987 and, therefore, the income must have to be understood to have been received in the said assessment year i.e. 1989-1990.

  2. The issue is capable of resolution within a short compass. A reading of the decision of this Court in E.D. Sassoon & Co. Ltd. (supra) would go to show that the income to be chargeable to tax must accrue or arise at any point of time during the previous year. This Court in E.D. Sassoon & Co. Ltd.’s case (supra) has held in categorical terms that income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the appellant-assessee. The following extract from the judgment in E.D. Sassoon & Co. Ltd.’s case (supra) amply illustrates the above position :

“The word “earned” has not been used in Section 4 of the Income-tax Act. The section talks of “income, profits and gains” from whatever source derived which (a) are received by or on behalf of the assessee, or (b) accrue or arise to the assessee in the taxable territories during the chargeable accounting period. Neither the word “income” nor the words “is received”, “accrues” and “arises” have been defined in the Act. The Privy Council in Commissioner of Income-tax, Bengal v. Shaw Wallace & Co. (1932) I.L.R. 59 Cal. 1343 at 1352 attempted a definition of the term “income” in the words following :-

“Income, their Lordships think, in the Indian Income-tax Act, connotes a periodical monetary return ‘coming in’ with some sort of regularity, or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall.”.. emphasis supplied.

Triggering of Force Majeure from the GST perspective

Wherever force majeure is triggered in such a case, the Doctrine of Frustration(Section 56 of the Indian Contract Act) would be valid grounds to argue, that during the lockdown period the Contract was frustrated wherein unforeseen events which made it illegal or impossible to perform the contract, infact the same can be stated for scenarios where contracts are not performed in a manner which is radically different from what was initially envisaged by both the parties. In that case, there are valid grounds to argue, that the price revision was given effect to save the Contract which otherwise would have been voidable due to impossibility of performance. In such a scenario if the contract is void, the privity would cease thereby no GST will be payable in absence of a ‘transaction’ in the first case.

The Hon’ble Supreme Court while discussing what is impossibility of performance has held in Satyabhrata Ghose vs. Mugneeram Bangur AIR 1954 SC 44 that

“This is much is clear that the word ‘ impossible has bot been used here in the sense of physical or literal impossibility. The Performance of the act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change in circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to the act which he promises to do”.

Similarly even in the cases of goods sent for job work or goods sent on approval basis. For the period covered under lockdown neither the Supplier of goods, services since the parties were unable to perform their services due to a Central Act forbidding them to do so, the same can be excluded from the time stated under the GST Act under section 142.

Thus to conclude I wish to submit that, when it comes to any revision in price of either goods or services, it is a case of a de novo or fresh determination of the actual consideration now payable. Such a redetermined consideration or as the case may be modified/amended terms of agreement, as long as the same can be directly attributed to the Covid Lockdown, the same shall be valid and allowed as per law.

Posted in May.