M/S. L.S.Mills vs. The Assistant Commissioner Of CGST And C.Excise

By the impugned order, the respondent has confirmed the demand proposed in Show Cause Notice No.29/2022 dated 25.08.2022. The operative portion of the impugned order reads as under:-

In view of the above I pass the following order: ORDER a) I demand an amount of Rs.12,22,729/- (IGST: 4,18,975/- + CGST: Rs.4,01,877/- + SGST: Rs. _____________ Page No. 2 of 11 https://www.mhc.tn.gov.in/judis 4,01,877/-). (Rupees Twelve lakhs twenty two thousand seven hundred and twenty nine only) towards wrongly availed Input Tax credit as detailed in Para 4.1 above and recover under Section 73(1) of CGST Act, 2017/Tamil Nadu GST Act 2017 read with Section 20 of the IGST Act, 2017; b) I appropriate the amount of Rs.3,20,510/- (CGST: Rs.1,60,255 + SGST: Rs.1,60,255/-) reversed towards wrongly availed Input Tax credit vide DRC 03 (D13304220544247/ 3304220544279/ 330422054303) dated 28.04.2022 against the demand made in Sl. No. 15 (a) above; c) I demand interest at the appropriate rate on the amount demanded [in para 15 (a)] and recover under section 73(1) of CGST Act, 2017/ Tamil Nadu GST Act 2017 read with section 50(3) of CGST Act, 2017/Tamil Nadu GST Act 2017 and Section 20 of the IGST Act, 2017; d) I demand an amount of Rs.37,00,693/-( IGST Rs. 1,98,307 + CGST Rs.17,51,193 + SGST Rs. 17,51,193) (Rupees Thirty seven lakhs six hundred and ninety three only) towards wrongly availed Input Tax credit [as detailed in Para 4.2 above] and recover under Section 73(1) of CGST Act, 2017/ Tamil Nadu GST Act, 2017 read with Section 20 of the IGST act, 2017; e) I appropriate an amount of Rs.4,05,445/- (IGST: Rs.11319/- + CGST: Rs.1,97,063/-+ SGST: Rs. 1,97,063/-) reversed towards wrongly availed Input Tax Credit vide DRC 03 (D13304220544247/3304220544279)

This order is issued without prejudice to any other action that may be initiated against the taxpayer under the provisions of the Act or the Rules, or under any other law for the time being in force in India.

The Show Cause Notice bearing SCN No. 29 /2022- Asst. Commr dated 25.08.2022 stands disposed in the above terms.

It is noticed that as far as the tax confirmed in the above paragraph 15(g) and the interest in paragraph 15(h) are concerned, the issue is now covered in favour of the petitioner in terms of the decision of _____________ Page No. 5 of 11 https://www.mhc.tn.gov.in/judis the Hon'ble Supreme Court in Union of India Vs. M/s.Mohit Minerals Pvt. Ltd., 2022 (61) GSTL 257 (SC) : 2022 INSC 596. The operative portion of the said decision reads as under:-

We are in agreement with the High Court to the extent that a tax on the supply of a service, which has already been included by the legislation as a tax on the composite supply of goods, cannot be allowed. E Conclusion

Based on the above discussion, we have reached the following conclusion: (i) The recommendations of the GST Council are not binding on the Union and States for the following reasons: (a) The deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units; (b)Neither does Article 279A begin with a non- obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a _____________ Page No. 6 of 11 https://www.mhc.tn.gov.in/judis repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The ‘recommendations’ of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation; and (c) The Government while exercising its rule- making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature’s power to enact primary legislations; (ii)On a conjoint reading of Sections 2(11) and 13(9) of the IGST Act, read with Section 2(93) of the CGST Act, the import of goods by a CIF contract constitutes an “inter-state” supply which can be subject to IGST where the importer of such goods would be the recipient of shipping service; (iii)The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient – in this case the importer – by _____________ Page No. 7 of 11 https://www.mhc.tn.gov.in/judis Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different from the recipient prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge; (iv)Section 5(4) of the IGST Act enables the Central Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation; (v)The impugned levy imposed on the ‘service’ aspect of the transaction is in violation of the principle of ‘composite supply’ enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act.

Thus, the demand confirmed in paragraph 15(g) and paragraph 15(h) of the impugned order is dropped.

As far as the rest of the demand arising out the mis-match between the Input Tax Credit availed and the tax paid by the supplier and the demand of tax on the renewal charges paid for Factory License are concerned, the same can be adjudicated by the petitioner before the _____________ Page No. 8 of 11 https://www.mhc.tn.gov.in/judis Appellate Commissioner. Therefore, the petitioner can file an appeal on the rest of the issues.

Under these circumstance, while dropping the demand in paragraph 15(g) and paragraph 15(h) of the impugned order, liberty is given to the petitioner to file a statutory appeal before the Commissioner of GST & Central Excise (Appeals), Coimbatore at Madurai, C.R.Building, Bibikulam, Madurai – 625 002, as far as other demands confirmed vide the impugned order are concerned.

The Commissioner of GST & Central Excise (Appeals), Coimbatore at Madurai, C.R.Building, Bibikulam, Madurai – 625 002 is suo motu impleaded as the second respondent in this proceeding.

The petitioner shall file an appeal before the second respondent within a period of 30 days from today on the rest of the issues. The second respondent shall thereafter proceed to pass an appropriate order on merits and in accordance with law. Needless to state, the petitioner shall deposit 10% of the balance amount on the duty confirmed in the impugned order while filing such appeal. _____________ Page No. 9 of 11 https://www.mhc.tn.gov.in/judis

In the result, this Writ Petition stands partly allowed. No costs. Consequently, connected Miscellaneous Petition is closed. 29.07.2024 Index: Yes/ No Neutral Citation: Yes / No Speaking Order / Non-Speaking Order JEN Copy To: 1.The Assistant Commissioner of CGST & C. Excise, Dindigul-II Division, Dindigul. 2.The Commissioner of GST & Central Excise (Appeals), Coimbatore at Madurai, C.R.Building, Bibikulam, Madurai – 625 002. _____________ Page No. 10 of 11 https://www.mhc.tn.gov.in/judis C.SARAVANAN