Gujarat High Court: Director General of Goods and Services Tax Intelligence Officer can issue summons under CGST Act
The Gujarat High Court in Yasho Industries Ltd. v. UOI has upheld the validity of summons issued by Director General of Goods and Services Tax Intelligence Officer (DGGI Officer) under the Central Goods and Services Tax Act, 2017 (CGST Act).
The key contention of the Petitioner was that the issuance of summons by the DGGI Officer was without jurisdiction, based on the fact that:
The Court held that the definition of ‘proper officer’ in relation to any function to be performed under the CGST Act means, the Commissioner or a Central Tax officer who is assigned that function by the Commissioner. Through a Circular dated 5 July 2017, the CBIC had in fact assigned the functions of proper officers in relation to the various provisions of the CGST Act to Central Tax officers and therefore, as such the DGGI Officer has been assigned the function of ‘proper officer’. Noting the distinction between assignment of functions as per section 2(91) and delegation of powers by the Commissioner under Section 167, the Court noted that no particular notification under Section 167 is required to be issued in such a case, as the power exercised by DGGI officer is not a delegated power from the Commissioner.
Input Tax Credit to be allowed on input inherently lost in manufacturing process
The Madras High Court in a batch of writ petitions titled as ARS Steels and Alloy International Pvt. Ltd. v. The State Tax Officer dealt with the issue of availability of Input Tax Credit (ITC) for a loss of input arising out of a manufacturing process. The tax officials sought a reversal for such ITC arguing that this loss of input attracted the restriction under clause (h) to Section 17(5) of the CGST Act which states that ITC will not be available in respect of ‘goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples’.
The Court held that the loss which is occasioned by the process of manufacture cannot be equated to any of the instances set out in clause (h) to Section 17(5) as such loss is inherent to the process of manufacture itself and the situations in clause (h) indicate loss of inputs that are quantifiable and involve external factors or compulsions.
CESTAT Bangalore upholds service tax demand on performance fee and carried interest paid to AMC by Venture Capital Funds
CESTAT, Bangalore in a batch of appeals titled as ICICI Econet Internet and Technology Fund v. Commissioner of Central Tax, Bangalore has upheld the demand of service tax on certain expenses incurred and disbursements made by a Venture Capital Fund (VCF) incorporated as a Trust.
The Appellant was a Venture Capital Fund (Fund/Trust) established as a trust under the Indian Trusts Act, 1882. The Fund was created by way of pooled or collective investments by several investors, who became contributing investors or beneficiaries of the Trust. The returns from such investments made by the Fund were subsequently disbursed among the contributors. ICICI Trusteeship Services Ltd was appointed as the ‘Trustee’ for the Fund who in turn, appointed ICICI Venture Funds Management Company as the asset management company (AMC), for the purpose of managing the Fund and providing professional and experienced advice, in lieu of which a performance fee was paid to the AMC by the Trust. The AMC and its employees/nominees were also entitled to certain ‘carried interest’ which was in the nature of additional return against their own investment in the Fund.
The service tax demand pertained to expenses which included performance fee paid to the AMC by VCF and disbursement of carried interest to Class B/C unit holders in the Trust as service income earned by the Trust under the category of ‘Banking and Other Financial Services’ (‘BOFS‘).
The allegation of the Department was that though certain amounts were withheld by the Appellant from the investors and given the colour of ‘expenses’, in reality, such amounts withheld as expenses constituted ‘consideration’ towards the BOFS rendered to the investors by the Appellant.
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