Levy of GST— The present appeal has been filed against the Advance Ruling Order issued by the Authority for Advance Ruling, Uttar Pradesh.
As per appeal, the respondent is engaged in the business of manufacturing, marketing and distribution of cigarettes. The goods are manufactured outside the state and later on transferred, on stock transfer basis, after payment of 28% GST and Compensation Cess. In order to grow the business the respondent has launched a new sale scheme wherein they will be supplying extra packs of cigarettes along with regular supply quantity without receiving any extra consideration for that additional supply.
Accordingly, in order to ascertain the tax liability on the additional quantity of cigarettes, the respondent had filed an advance ruling, before the Advance Ruling Authority, Uttar Pradesh, on following issues:-
a. Whether the extra packs of cigarettes would again be leviable to GST.
b. If yes, the taxable value which can be attributed to such extra packs of cigarettes for levy of GST.
c. Whether extra packs of cigarettes would be considered as exempt supply or free samples and hence attracts provisions of Section 17(2) of the UPGST, Act 2017 read with Rule 42 of the UPGST Rules 2017, or clause (h) of Section 17(5) of the UPGST Act, 2017.
The Authority for Advance Ruling, ruled negative that the extra packs of cigarettes would not again be leviable to GST.
The extra packs of cigarettes will not be considered as exempt supplies or free samples and hence the provisions of 17(2) of the UPGST Act, 2017 read with Rule 42 of the UPGST Rules, 2017 or clause (h) of Section17 (5) of the UPGST Act, 2017 will not be applicable.
The Appellant made the following grounds for filing of appeal: -
6.1) Since the cigarettes is not only subjected to ad-valorem taxation rather it is subjected to specific taxation of quantity based system, therefore any ruling passed without considering all the aspect is bad in law.
6.2) The Authority for Advance Ruling does not have authority to discuss about Central Excise Act, 1944, IGST Act, 2017 and GST (Compensation to State) Act, 2017.
6.3) Compensation Cess on cigarettes is applicable at specific rate (depending upon filter/non filter and length of cigarette) hence calculation of tax on all 130 packs of cigarette on the basis of tax invoice issued showing taxable value only for 100 packs of cigarettes is misleading. The respondent appears to have intentionally avoided the mention of quantity in numbers with categorization of filter or non-filter and length of filter and cigarettes on which compensation cess to be calculated. Accordingly there appears a mode of possible substantial tax evasion in the form of compensation cess as it is leviable on per thousand quantities.
6.4) The respondent has relied upon Circular No. 92/11/2019-GST dated 07.03.2019, however by reading all the definitions “Cess” is not the tax for which the said Circular deals with. Further buy one get one free clause in the said Circular talks about only certain sections of trade and industry such as pharmaceutical companies etc and not about evasion prone commodity like cigarette and pan masala.
6.5) The party did not inform the Authority that there are several alerts issued against the said firm by department. Investigation also revealed that the party is also one of the beneficiaries of fake ITC generated. A case against the party is pending at Hon'ble High Court of Delhi for fake input credit and misuse of ITC.
6.6) The party did not inform the authority that they are indulged in claiming refund of accumulated ITC obtained through fraudulent means and many search operations have been conducted against the party.
Held that— though the Appellant has informed that there are several alerts issued against the said firm by department and that they have indulged in claiming refund of accumulated ITC obtained through fraudulent means and many search operations have been conducted against the party, but, nowhere it has been objected by the Appellant that the questions raised in the advance ruling application of the respondent is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the Act. Accordingly, we are of the opinion that the Advance Ruling Authority has righty admitted and decided the application for advance ruling filed by the respondent.