01 January 0001

Tax Amicus: January 2018

by Krithika Jaganathan

Why tax liquidated damages?

Parties to contract generally incorporate their expectation in terms of damage caused by failure of either party to perform its obligations completely or as per the agreed terms. Clauses like forfeiture of earnest money deposit, rent for delay in lifting goods; agreeing to shoulder testing charges for samples to meet standards; cost of removing rejected goods, etc., are in nature of a measure of damages to which parties agree. Are these liquidated damages and forfeiture consideration for non-performance/delayed performance? According to the author, liquidated damages may hardly satisfy the essentials of supply or service as by receipt of damages from the defaulting party it cannot be said that the aggrieved party is tolerating the non-performance or delayed performance. A contract cannot be read to be agreeing to a breach of a contract as the same is for execution and not for the breach. Considering international jurisprudence, the author believes that it is time the Government clarifies the issue with an illustrative list of what constitutes tolerance of an act.


Goods and Services Tax (GST)

Act, Notifications, Circulars and Press Releases

  • GST (Compensation to States) Amendment Bill, 2017 receives Presidential assent
  • GST rates to be revised on number of goods, from 25-1-2018
  • GST Council recommends revision in tax rate for many services
  • Late fees for filing of certain GST returns to be reduced
  • Cancellation of registration – GST Council recommends certain relaxations
  • GST exemption to hostel mess clarified - Supply of food or drink by an educational institution in a mess or canteen, is exempt
  • GST rate under Composition Levy reduced for manufacturers
  • GST liability under Legal services clarified
  • Gambling, horse racing and entry in casino – Value for GST clarified
  • Accommodation services – GST rate clarified
  • Rate of GST on goods of Heading 6802 clarified by Rajasthan Commercial Tax department
  • E-way Bill under GST for entry in West Bengal – Validity of old way bills

Ratio decidendi

  • No GST on price discounted from MRP: Consumer Forum



Notifications and Circulars

  • Temporary import of broadcasting equipment and sport goods, exempted
  • Customs duty reduced on imports from Malaysia, ASEAN, Korea RP and Japan
  • Telecommunication Antenna covered under TI 8517 62

Ratio decidendi

  • Valuation – Payment for distribution rights when not includible – CESTAT Delhi
  • Valuation – Advertising and promotion expenses borne by importer – CESTAT Delhi
  • SAD refund – Non-mentioning of grades in sales invoice is not fatal – CESTAT Chennai
  • Scrap import - Goods when can be mutilated – CESTAT Chandigarh
  • SEZ - Facilities or amenities needed for units cannot be ‘infrastructure facilities’ needed for SEZ – Gujarat High Court
  • EPCG - Maintenance of logbooks of use of imported cars when not required – CESTAT Mumbai
  • Thermistor & thermistor sub-assembly classifiable under Ch. 85 – CESTAT Delhi relies on earlier decision on classification of ‘resistor blower’
  • No appeal lies against revocation of suspension of CHA licence – CESTAT Mumbai


Central Excise and Service Tax

Ratio decidendi

  • Customer’s premises when to be considered as ‘place of removal’ – Supreme Court dismisses SLP against Chhattisgarh High Court Order
  • Valuation - Deduction of VAT subsidy given by State of Rajasthan – CESTAT Delhi
  • Cenvat credit - Excess goods as found by department, not suppression – CESTAT Ahmedabad
  • Cenvat credit on cleaning, air travel agent and convention services – CESTAT Chandigarh
  • Area based exemption to different ‘unit’ in same factory – CESTAT Chandigarh
  • Banking and Other Financial Services - Coverage of ‘operating lease’ – CESTAT Delhi
  • Exemption when service provided to UN entity by sub-contractor – CESTAT Delhi
  • Cenvat credit on STTG certificate issued by Railways before August, 2014 – CESTAT Delhi
  • Food preparations for infants cleared to industrial consumer – CESTAT Chandigarh Members differ on classification
  • Mounting electrical components on board is not ‘manufacture’ – CESTAT Delhi
  • Mounting electrical components on board is not ‘manufacture’ – CESTAT Delhi Services of restoration and giving special effects in old films not covered under Video Tape Production service – CESTAT Chennai


Value Added Tax (VAT)

Ratio decidendi

  • Exports - Exemption from Sales Tax when transaction inextricably connected – Madras High Court
  • Karnataka VAT - ITC and scope of Section 10(3) of KVAT – Karnataka High Court


January, 2017/Issue-79 January, 2018/Issue-79

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