TaxTMI 
TaxTMI 
2024 (3) TMI 631
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....n Technology design and software development services pertaining to mobile devices ("IT Services") to its overseas holding company, namely, M/s Samsung Electronics Company Limited, Korea (hereinafter referred to as the "SEC Korea") in terms of prevalent service agreement dated January 1, 2019. Such export of IT services is made by the Petitioner under Letter of Undertaking (hereinafter referred to as the "LOU") without payment of IGST which constitutes zero rated supply as per Section 16 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the "IGST Act, 2017") b. For rendering IT Services to SEC Korea, the Petitioner procures various inputs, input services, and capital goods and accordingly avails ITC of the CGST, SGST, and IGST paid thereon, in accordance with the applicable provisions of the GST laws. c. The Petitioner had filed a refund claim of unutilised ITC of CGST, SGST, and IGST paid on various inputs and input services for the period of April 2019 to June 2019. After due consideration by the Department, said refund claim amounting to Rs. 6,36,69,447/- was sanctioned by the Department barring for an amount of Rs. 7,500/- on the ground of claim....
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....v. Commissioner of Central Excise, Chennai reported in 2006 (202) ELT 389 (SC). d. The Department has travelled beyond the scope of show cause notices. The show cause notices and the refund rejection orders had rejected the refund on the ground that the specific goods are not consumed in the process of provision of output service and hence cannot be treated as inputs. However, the impugned orders dated October 25, 2021 and February 24, 2023, have proceeded on a completely different ground and have held that the expenses incurred on specific goods were required to be capitalised in the books of accounts as per Accounting Standard 10, and hence, the same are covered under the ambit of capital goods in terms of Section 2(19) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the "CGST Act, 2017"). The Respondent No. 2 has therefore clearly travelled beyond the scope of the show cause notices, which is clearly impermissible in law. Reliance is placed on the judgments of the Hon'ble Supreme Court in Reckitt & Colman of India Ltd. v. Collector of Central Excise reported in (1997) 10 SCC 379 and Commissioner of Central Excise, Bangalore v. M/s Brindavan Beverage....
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....ted that the capitalisation of assets cannot depend upon any straight jacket formula. The question of capitalisation has to be seen and analysed, keeping in mind the use case of the given industry. Goods which can be capital goods for one industry can be input for other industry. The Supreme Court in Tata Engineering & Locomotive Company Ltd. v. State of Bihar reported in 1994 (74) ELT 193 (SC) held that tyres, tubes, and batteries would constitute inputs as they are essential and necessary for producing the goods in which it has been used. The Supreme Court held that no vehicle could operate or work, nor can it be said to have been produced unless tyres, tubes, and batteries are fixed to it, hence, these items would be inputs. Similarly, the specific goods in question are inputs because they are put for use for providing the services of R & D, software development, and validation thereof. i. Without prejudice, the Petitioner further submits that the impugned orders dated October 25, 2021 and February 24, 2023, have erred in questioning the applicability of Accounting Standards under GST laws. Accounting Standards are applied to present Financial Statements reliably and the appli....
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....ous factual and legal circumstances. This uniformity is fundamental to fostering fairness, transparency and predictability within the tax regime. The absence of consistency can breed perceptions of inequity and arbitrariness, eroding taxpayer compliance and faith in the tax systems' integrity. 8. The Petitioner in the instant case has put forth a compelling argument, contending that the approach adopted by the Department in dealing with similar facts and circumstances lacks consistency. Upon a careful consideration, this Court finds itself in agreement with the Petitioner's assertion. It is evident that refund claims arising from precisely similar facts and circumstances for previous and subsequent assessment periods were duly sanctioned. However, a stark deviation from this precedent is observed in the treatment of refund claims for the periods of July-September 2019 and October-December, 2019, which have been inexplicably withheld by the Department. This sudden change in the Department's stand is not only inconsistent but also irrational. The principle of consistency dictates that when faced with identical factual and legal circumstances, the treatment should remain uniform. In ....
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....ion and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd. [(2001) 130 ELT 193 : (2001) 42 RLT 800 (cegat)] cannot be permitted to take the opposite stand in this case. If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary." 13. Similarly, reference can also be made to Indian Oil Corporation Ltd. v. CCE (supra), relevant paragraph of which is extracted below: "9. Since the point involved in the present case is identical to the point involved in Hindustan Petroleum Corpn. Ltd. [(2000) 124 ELT 323 (Tri)] and the Department having accepted the principle laid down in Hindustan Petroleum Corpn. Ltd. [(2000) 124 ELT 323 (Tri)] the Department cannot be permitted to take a different stand in the present appeals." 14. In Bharat Sanchar Nigam Ltd. And Anr. v. Union of India and others reported in (2006) 3 SCC 1, the Supreme Court held that even t....
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....in the books of account of the person claiming ITC and are used in the course or furtherance of business. On the other hand, "input" is defined as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. The distinction between inputs and capital goods lies in whether the value of the goods is capitalized in the books of account of the taxpayer claiming ITC. Capital goods, by virtue of their nature, are intended for long-term use in the business and are typically subject to capitalization. Inputs, however, are goods used in the day-to-day operations of the business and are not subject to capitalization. In the instant case, specific goods procured by the Petitioner for R & D, software development, and validation directly contributed to the provisions of IT services exported to SEC Korea. These goods were not capitalized in the books of account, as they were deemed redundant after the completion and validation of software projects. The Petitioner's assertion aligns with the definition of inputs provided under the CGST Act, 2017 which includes any goods used or intended to be used in the course or furtherance of business. ....
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....judgments is patently clear that a show cause notice is required to provide details of the nature of the offence and the grounds on which the show cause notice has been issued. Furthermore, the order that is subsequently passed, based on the show cause notice, cannot go beyond the said show cause notice and cannot in any manner penalise the noticee on grounds that were not stated in the show cause notice. 10. The rationale for not allowing the respondents from going beyond the realm of the show cause notice is that the petitioner has to be given a chance to put up his case with regard to the said show cause notice. In the event, a particular case is made out in the show cause notice and the order passed subsequently is beyond the said show cause notice, the same would amount to violation of the principles of natural justice, as the petitioner would not have been aware of the new grounds or new factual elements and could never have placed his case for the above before the authority concerned. It is in this background that the Supreme Court in umpteen judgments has laid down the law that an order passed by an authority cannot go beyond the scope of the show cause notice. In fact, t....
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....e institutions tasked with upholding it. Thus, this Court holds that, adhering to the show cause notice is not merely a procedural formality, but a mandatory requirement, beyond the scope of which, no action can be taken. Adherence to the show cause notice is a fundamental safeguard against arbitrary exercises of power, ensuring that authority remains tethered to the principles of justice and the rule of law." 20. It is evident in the instant case that the Department has deviated from the show cause notice, and as such any order passed by it running contrary to the grounds taken in the show cause notice, cannot be sustained. Issuance of the show cause notice represents a pivotal juncture in legal or administrative proceedings, demarcating the boundaries within which any authority can exercise its powers. Adhering to the confines of the show cause notice upholds principles of fairness, accountability, procedural regularly, and legal certainty essential for the legitimacy and effectiveness of the governance systems. Any attempt to transcend these limits not only violates the rights of the individuals or entities involved but also undermines the rule of law and public trust in the in....