TMI Tax Updates - e-Newsletter
January 25, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• CENVAT Credit - fake invoices - the penalty is not imposable on a juristic person (a company) u/R 26 of the Central Excise Rules, 2002

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Articles

1. A SALES TAX PRACTIONER AND A LEGAL PRACTITIONER ARE DISTINCT INDIVIDUAL PROFESSIONALS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Grant of Presidential Awards to the Officers of the Central Board of Indirect Taxes and Customs (CBIC) on the eve of the Republic Day, 2019

2. Some Reflections on Micro Credit and How a Public Credit Registry Can Strengthen It (Dr Viral V Acharya, Deputy Governor, Reserve Bank of India - December 15, 2018 - Delivered at IIT Bombay Tech Fest)

Notifications

Customs

1. 06/2019 - dated 23-1-2019 - Cus (NT)

President is pleased to award Medals and Appreciation Certificates for – ‘Exceptionally Meritorious Service rendered at the Risk of Life’ and ‘Specially Distinguished Record of Service’.

GST - States

2. S.O. 15 - dated 15-1-2019 - Bihar SGST

Notification for changes in Bihar advance Ruling Authority

3. S.O.14 - dated 14-1-2019 - Bihar SGST

Amendment in Notification No. S.O. 180, dated the 19th April, 2018

4. S.O. 02 - dated 3-1-2019 - Bihar SGST

Time limit extended for furnishing GSTR-3B for newly migrated taxpayers

5. 29/2018- State Tax (Rate) - S.O. 283 - dated 31-12-2018 - Bihar SGST

Amendment in Notification No. 13/2017 – State Tax (Rate), dated the 29th June, 2017

6. 28/2018- State Tax (Rate) - S.O. 282 - dated 31-12-2018 - Bihar SGST

Amendment in Notification No. 12/2017 –State Tax (Rate), dated the 29th June, 2017

7. 27/2018-State Tax (Rate) - S.O. 281 - dated 31-12-2018 - Bihar SGST

Amendment in Notification No. 11/2017 – State Tax (Rate), dated the 29th June, 2017

8. S.O. No. 84 - 61/2018 – State Tax - dated 21-12-2018 - Jharkhand SGST

Seeks to amend Notification No. 50/2018-State Tax, dated the 26th September, 2018

9. S.O. No. 83 - 60/2018 – State Tax - dated 7-12-2018 - Jharkhand SGST

Jharkhand Goods and Services Tax (Thirteenth Amendment) Rules, 2018

10. S.O. No.82 - 58/2018 – State Tax - dated 6-12-2018 - Jharkhand SGST

Notifies the persons whose registration under the said Act has been cancelled by the proper officer on or before the 30th September, 2018 furnish the final return in Form GSTR-10 of the said rules till the 31st December, 2018

Circulars / Instructions / Orders

GST - States

1. Order No. 01/2018-State Tax - dated 7-1-2019

Jharkhand Goods and Services Tax (Removal of Difficulties) Order, 2018

Highlights / Catch Notes

Income Tax

• Miscellaneous income declared u/s 153A accepted; no penalty u/s 271AAA imposed.

  Case-Laws - AT : Penalty u/s 271AAA - The surrendered amount was declared in the return of income u/s 153A as misc. income. AO accepted this surrendered amount as misc. income as declared by the assessee in the return of income and levied the income tax on it accordingly - No penalty.
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• No Capital Gains Tax Without Property Possession Transfer as Per Section 2(47)(v).

  Case-Laws - AT : Capital Gains - There may be a document by which certain rights were transferred but once the possession of property has not been handed over, the assessee does not become liable to pay capital gains tax on such transaction as the conditions laid down in section 2(47)(v) have not been fulfilled.
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• Companies with Less Than 75% Revenue from Software Development Excluded as Comparables in Transfer Pricing Assessments.

  Case-Laws - AT : TPA - comparable selection - companies with revenues less than 75% from software development services would be ideal to be excluded, as economic circumstances of such companies would be different.
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Customs

• Customs House Agent Misclassifies Imported Burmese Teak as Prohibited Indian Wood; Export Dispute Arises.

  Case-Laws - AT : Export of prohibited item - item description covered under prohibited wood does not cover blocks that to made exclusively out of imported logs/timber - CHA had mistakenly declared it as Indian wood instead of imported Burmese teak wood.
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• EOU Faces Duty Liability Issues Due to Incomplete Warehousing and Export Obligations Under Notification No. 52/2003-Cus.

  Case-Laws - AT : 100% EOU - warehousing of goods - completion of warehousing period - failure to fulfill export obligation - the duty liability, if any, should be with reference to N/N. 52/2003-Cus. - The depreciation over the entire tenor would result in ‘nil’ value for the purpose of assessment.
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• Gold Dore Bars Import Exemption: No Distinction Between Mining and Producer Companies; Interpret Notifications Liberally for Purpose Fulfillment.

  Case-Laws - AT : Benefit of exemption - Import of Gold dore bar - there is no difference or distinction between the mining company and the producer company - the conditions of the notifications should be construed liberally and should not be so read that it leads to defeat of purpose of the notification. - Exemption allowed.
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Service Tax

• Charges from non-members by clubs or associations are taxable; mutuality principle doesn't apply. Not limited to post-2011.

  Case-Laws - AT : Club or association service - the contentions of the appellants that charges collected from non-members are taxable only from 5.1.2011 are not acceptable. It cannot be said that principle of mutuality of interest is applicable in respect of non-members.
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• Insufficient Penalty Evidence for Service Tax Evasion Allegations; Department Must Prove Intent Under Sub-section (4.

  Case-Laws - AT : Levy of penalty - Mere non-payment or short payment for a particular period even till the time audit is not sufficient to prove the grave allegations as are contained in sub-section (4). It is rather the onus of Department to come forward to give some evidence of positive act on part of the appellant proving the appellants intend to evade the tax duty
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• Ores Transport in Mining Areas Exempt from 'Cargo Handling Services' Service Tax Classification.

  Case-Laws - AT : Classification of service - the transportation of the ores located at different locations within the mining area would not fall within the definition of ‘Cargo Handling services’.
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Central Excise

• Printed Stationery Not Marketable, No Excise Duty Due: Revenue Fails to Prove Marketability of Forms.

  Case-Laws - AT : Manufacture - Printing of the forms etc. - There is no material on record that the printed stationary of the appellant is marketable - Revenue failed to discharge the burden of test of marketability, the demand of duty cannot be sustained.
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• Revenue Dept's Claims Questioned: No Buyer Info or Independent Evidence on Alleged Clandestine Goods Removal.

  Case-Laws - AT : Clandestine removal - Revenue were not able to provide even the single buyer’s name and address who has purchased such goods from them which leads to doubt about the credibility of their statement. The department apart from the papers seized from the locker has not been able to give any independent evidence which can corroborate the charges.
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• Company Cleared of Penalty u/r 26 of Central Excise Rules, 2002 Due to Lack of Knowledge on Fake Invoices.

  Case-Laws - AT : CENVAT Credit - fake invoices - The person is a company and having no knowledge or benefit arriving out of the activity - the penalty is not imposable on a juristic person under Rule 26 of the Central Excise Rules, 2002
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• CENVAT Credit One-Year Limit Inapplicable: Invoices Pre-Amendment u/r 4 CCR Not Bound by Time Restriction.

  Case-Laws - AT : CENVAT Credit - time limitation - the limitation of one year for availing the CENVAT credit as per Rule 4 of CCR is not applicable in the present case because the invoices pertains to the period prior to the amendment
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• Fly-ash is not a manufactured product but a compulsory by-product of electricity generation from lignite.

  Case-Laws - AT : Fly-ash in the given circumstances is qualifying only one of the conditions i.e. of marketability and is not qualifying the condition of manufacture, it being compulsorily generated during the process of generation of electricity from lignite and the appellant is the manufacturer of lignite. In the given circumstances, fly-ash is not even the by-product.
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Case Laws:

• GST

• 2019 (1) TMI 1215
  Validity of Press Release dated 18.10.2018 and 21.10.2018 - Held that:- The respondent produced copy of order bearing No.02/2018-Central Tax dated 31.12.2018 under Section 16(4) of Central Goods and Services Tax Act, 2017 passed by Government of India, Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs and submitted that in view thereof, the present petition has become infructuous and may be disposed of as such - the present petition is disposed of as infructuous.

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• Income Tax

• 2019 (1) TMI 1214
  Validity of reassessment proceedings - assessee had claimed deduction of profit derived from such export business in terms of Section 10B - tribunal came to the conclusion that the issue was examined during the original scrutiny assessment and therefore, could not be subject to reassessment proceedings - Held that:- We are in agreement with the view taken by the Tribunal. The Tribunal has correctly placed reliance on a decision of the Supreme Court in the case of CIT Vs. Kelvinator of India Ltd [2010 (1) TMI 11 - SUPREME COURT OF INDIA] holding that even post amendment in Section 147 of the Act w.e.f. 1.4.1989, the concept of change of opinion would continue to apply. In the present case, the Assessing Officer had examined entire claim of deduction under Section 10B of the Act. This included the claim made by the assessee to another EOU. This element of the claim was also examined by the Assessing Officer as can be seen from the above quoted portion of assessment order. Any attempt on his part to disallow the claim would now be based on mere change of opinion. No question of law.

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• 2019 (1) TMI 1213
  Disallowance u/s 14A as per Rule 8D - Held that:- Tribunal is on the basis of clear mandate of Section 14(2) of the Act which provides that the Assessing Officer will determine the amount of expenditure to be disallowed to earn exempt income as provided in Rule 8D of the Rules, as if he is not satisfied with suo motu disallowance made by the respondent. In fact this interpretation of Section 14A(2) of the Act by the Tribunal has now been taken in the case of Godrej & Boyce Manufacturing Co Ltd Vs. Dy. CIT & Anr [2017 (5) TMI 403 - SUPREME COURT OF INDIA] it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It may only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. No substantial question of law

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• 2019 (1) TMI 1212
  Disallowance of Keyman Insurance Policy - premium paid by the assessee as Keyman Insurance Premium would not qualify for expenditure - Whether the said policy is personal insurance policy or Keyman Inusrance Policy? - Held that:- The issue of allowance of expenditure toward Keyman Insurance Premium taken out by the partnership firm in case of its partners, is no longer res integra. This Court in the case of Commissioner of Income Tax Vs. B.N. Exports [2010 (3) TMI 186 - BOMBAY HIGH COURT] has examined such an issue and held that the insurance policy taken out to protect the interest of the partnership firm against disruption in case of sudden death of partner, would be an allowable expenditure. The Tribunal had in fact relied on this decision while dismissing the Revenue's appeal. In view of the decisions of the various High Courts, the Central Board of Direct Taxes had also issued a Circular bearing No. 38/16 dated 22.11.2016 accepting such a view, making a particular reference to the decision of the Punjab & Haryana High Court in case of M/s. Ramesh Steels (2016 (5) TMI 1155 - PUNJAB & HARYANA HIGH COURT). The Tribunal has also relied on this circular. Therefore, the Revenue's objection in law is not sustainable. Even if we permit the Revenue to travel beyond what was argued before the Tribunal, the question whether the policy was a Keyman Policy or not has been held on facts against the Revenue by CIT(A). As noted, the CIT(A) in fact recorded that the Assessing Officer had no material to hold to the contrary. No question of law, therefore, arises. Addition u/s 14A - Held that:- Disallowance of an expenditure offered by the assessee for earning income exempt from tax which Tribunal accepted. Question No. 3 is an element of the same question where the Revenue argued that such disallowance cannot be discarded in relation to the shares held by the assessee by way of stock in trade. At the outset, we may record that this question does not arise out of the impugned order of the Tribunal since the Tribunal has not given any final finding on this aspect. Disallowance to net interest expenditure - Held that:- Tribunal while giving further relief to the assessee noted that the assessee had offered voluntary disallowance and that the assessee had otherwise also had sufficient interest free funds for making investment in tax exempt investments. Thus, this is an essential question of fact.

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• 2019 (1) TMI 1211
  Revision u/s 263 - high share premium as well as the high closing stock - Held that:- AO had made necessary inquiry/ verification with regard to both the issues namely high share premium as well as the high closing stock. Moreover, as noted this inquiry was done by the AO after having obtained the necessary approval from the Chief Commissioner of Income Tax. Infact this itself is an evidence of application of mind of the AO, followed by notice to the respondent and verification of the response of the respondent. The aforesaid facts while exercising the powers of revision has been completely ignored the CIT. The impugned order of the Tribunal correctly held following the decision of this Court in Gabrial (I) Ltd.(1993 (4) TMI 55 - BOMBAY HIGH COURT) that the Assessment Order dated 3rd July, 2013 cannot be termed erroneous simply because he may have written the order move elaborately or taken a different view on facts (which is not perverse).

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• 2019 (1) TMI 1210
  Reopening of assessment - expenditure towards provision for warranty disallowed - Held that:- According to the assessee, such claim was genuine. After such exercise, AO passed the order of assessment,in which, she made non disallowance towards the expenditure in question. In other words, the assessee's claim was accepted. In absence of any tangible material out side of assessment record, it would not be open for the AO to reopen the assessment on the said ground. Any attempt on her part would be based on a mere change of opinion as held in the case of CIT v/s. Kelvinator of India Ltd [2010 (1) TMI 11 - SUPREME COURT OF INDIA] has held that even post the amendments in Section 147 of the Act w.e.f. 01.04.1989, the concept of change of opinion, continues to hold the field. In the result, the impugned notice is quashed and set aside. - Decided in favour of assessee.

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• 2019 (1) TMI 1209
  Exemption u/s 11 - Disallowance of certain amounts paid to the persons specified in section 13(3) - Held that:- Such payments are neither unreasonable nor excessive. Here is a case in which Dr. Shirish Prayag is a qualified MBBS, MD practising since 1986. His academic achievements have been set out in the assessment order. When we consider the amount of Rs. 30 lakhs paid to him, namely, Rs. 2,50,000/- per month as salary, the same cannot be termed as excessive in the backdrop of the hospital receipts of Rs. 3.90 crore. AO has compared his remuneration with certain other part time doctors visiting the assessee-trust on call, which is not a good comparison. The assessee was continuously paying remuneration to Dr. Shirish Prayag. A chart of has been placed on record, which shows that for the A.Y. 2007-08, assessee paid a sum of Rs. 18 lakhs to Dr. Shirish Prayag, that got allowed by the AO. For the A.Y. 2008-09, he was again paid a sum of Rs. 18 lakhs which was also allowed by the AO. For the A.Y. 2010-11, he was paid a sum of Rs. 24 lakhs. The AO in his assessment made u/s.143(3), has allowed deduction of Rs. 24 lakhs paid to Dr. Shirish Prayag vide his order dated 28-12-2012, a copy of which is available on page 92 onwards of the paper book. In this shade of the matter, a reasonable increase of Rs. 50,000/- per month during the year under consideration, in our considered opinion, cannot be termed as unreasonable or excessive. Thus delete the addition to this extent. Payment made to Dr. Aarti Prayag as noticed above that she is a qualified MBBS and DCP from B.J. Medical College, Pune and working as Senior Pathologist for last 32 years. The remuneration paid to her during the year has been Rs. 50,000/- per month plus 25% of IPD and OPD collection of Pathology Lab. It is pertinent to note that the assessee paid a sum of Rs. 25,91,597/- to Dr.Aarti Prayag during the previous year relevant to the A.Y. 2010-11. AO vide his aforesaid assessment order has allowed full deduction. When we consider the quantum of amount paid by the assessee during the year vis-à-vis the amount paid and allowed in the immediately preceding assessment year, the payment during the year cannot be termed as unreasonable or excessive. We hold that the payment of Rs. 34.99 lakhs made by the assessee to Dr. Aarti Prayag is reasonable and does not call for any disallowance. Payment to Smt. Usha Prayag is amounting to Rs. 1,80,000/-, namely, Rs. 15,000/- per month. She was looking after the administration of the hospital since the inception of the trust and was handling safe-keeping of cash, supervision of banking transactions and also supervision of shift duties of staff nurses etc. She was also responsible for co-ordination between doctor-trustees and other trustees since beginning of the trust and her duties have been set out in the assessment order itself. When we consider the overall supervision of the hospital by Smt. Usha Prayag and payment of Rs. 15,000/- per month, the same appears to be quite reasonable and not excessive or reasonable in any manner. We, therefore, order to delete this addition. - Decided in favour of assessee.

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• 2019 (1) TMI 1208
  Penalty u/s 271AAA - income surrendered consequent to search - unexplained cash found at the time of search - Held that:- AO completed the assessment by accepting the return of income filed by the assessee which included surrendered amount of Rs. 51,64,100/-. In fact in the Assessment Order, AO added another sum of Rs. 14,00,000/- as unexplained cash found at the time of search which in the second round after the Tribunal’s order was deleted by the AO whereby accepting this cash belonged to the other entities. This aspect is not denied by the revenue. The initiation of penalty u/s 271AAA in the Assessment order is based on the surrendered amount which cannot be termed as undisclosed income. In fact, by surrendering the said amount, the assessee has disclosed it before the Revenue authorities. The quantum assessment order has nowhere stated that the surrendered amount of Rs. 51,64,100 is an undisclosed income. The surrendered amount was declared in the return of income u/s 153A as misc. income. AO accepted this surrendered amount as misc. income as declared by the assessee in the return of income and levied the income tax on it accordingly. In the present case, even the penalty order is silent on subject of undisclosed income. Therefore, provisions u/s 271AAA will not come under the purview as it is specifically a penalty relating to undisclosed income. - Appeal of the assessee is allowed.

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• 2019 (1) TMI 1207
  Disallowance of trading loss claimed on sale of stock - addition on the ground of genuineness and as being unsubstantiated - alternative claim of the assessee made u/s. 32(1)(iii) also not acceptable - Held that:- The assessee had stopped his business since long back and during the impugned year, the assessee sold some goods which were lying with him. There is no dispute on the opening stock as on 01.04.2005. The dispute is only for the assessee had sold old items only on losses of Rs. 77,10,789/-. AO has pointed out many discrepancies in the documents submitted by the assessee, but he accepted the cash book submitted by the assessee and closing balance shown in the cash book are in agreement with the financial statement of the assessee. The financial statements have been accepted by the Assessing Officer. It is clear from the submissions of the assessee that the goods which have been sold were very old. When the stock sold was very old, it is not strange to sell them at reduced rate. The Assessing Officer has no authority to compel the assessee as to at which rate, an assessee has to make sale of his goods. Considering the facts and circumstances of the case of the assessee, ground No. 1 of the assessee is allowed. Carry forward of short term capital loss on sale of fixed asset - Held that:- Short term capital loss was claimed by the appellant on account of sales of plant & machinery, therefore, the onus was clearly on the appellant to prove with corroborative evidence the transaction of sale to substantiate the claim of loss. In the absence of corroborative evidence, the disallowance made by the AO is fully justified. Further, the submission that deficiency is fully allowable to the assessee u/s 32(l)(iii) and to this extent the return may be deemed to have been revised, is not sustainable. Because neither the claim was made filing a valid revised return within 31.03.2008 nor it a legal claim on the facts of the case. In view of the above, the disallowance made by the A.O. is fully justified. Therefore, appeal failed on this ground.

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• 2019 (1) TMI 1206
  Disallowance of provisions made in the accounts for leave salary payable - Held that:- We find an identical issue had come up for consideration before this Tribunal in the case of Muthoot Vehicles and Asset Finance Ltd vs. ACIT [2013 (12) TMI 1662 - ITAT COCHIN] as held Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns. We set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in accordance with the decision rendered by Hon’ble Supreme Court in the case of M/s Exide Industries Ltd COMMR. OF INCOME TAX & ORS Versus M/s EXIDE INDUSTRIES LTD. & ANR. - [2009 (5) TMI 894 - SUPREME COURT] - Appeal filed by the assessee is treated as allowed for statistical purposes.

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• 2019 (1) TMI 1205
  TPA - international transaction - interest on receivables - Held that:- By the Finance Act of 2012 an Explanatory note has been brought to book into the statute book w.e.f. 1.4.2002. The relevant transactions before us relate to the financial year 2011-12. Therefore, the assessee cannot be expected to consider such a transaction as an international transaction during the relevant previous year. This Tribunal, in a number of cases has held that such interest on receivables is not an international transaction prior to the amendment. Thus we hold that the interest on receivables is not an international transaction for the relevant A.Y. - Decided in favour of assessee.

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• 2019 (1) TMI 1204
  Correct head of income - interest derived by the assessee on surplus advanced to the parties - Business income OR Income from other sources - Held that:- AO has not controverted the figures of the interest expenses in the assessment order. AO has only generally expressed that the total interest expenses was admissible as a deduction against the business income which has been claimed as exempt income by taking recourse to section 80IB (10) - also not the case of the Assessing Officer that the funds were not used for business as in the assessment order it is explicitly stated that the funds were used for business and therefore, the interest received cannot fall under the head income from Other Sources. On this premise, the Ld. CIT(A) has provided relief to the assessee. No infirmity in the findings of the Ld. CIT(Appeals) which is thereby upheld - Decided against revenue

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• 2019 (1) TMI 1203
  Penalty u/s 271(1)(c) - satisfaction recorded by the AO for initiating of the penalty proceedings - specification of correct limb at the time of initiation as well as at the time of levy of penalty - Held that:- It is evident that at the time of initiation of penalty proceedings in the assessment, AO mentioned one limb of clause (c) of section 271(1) of the Act i.e. ‘concealed the particulars of income’. But at the time of levying penalty, the Assessing Officer mentioned both the limbs of clause (c) of section 271(1) i.e. furnished inaccurate particulars of income and thereby concealed her income. This manner of recording of satisfaction suggests the existence of ambiguity with reference to applicability of specific limb. AO is under obligation to specify the correct limb at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue, we are of the opinion that the penalty order is liable to be quashed on this legal issue. - Decided in favour of assessee.

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• 2019 (1) TMI 1202
  Computation of capital gain - cost of acquisition of the property as on 01.04.1981 - Held that:- The assessee had filed original return of income of income on 30.07.2013 declaring income at Rs. 2,42,617/-. For the year under consideration, the assessee had sold his land at Balewadi, Tal. Haveli, Pune Dist. on 27.09.2012. The assessee had shown the cost of acquisition of the said property as on 01.04.1981 at Rs. 3,59,648/-, whereas the Assessing Officer had adopted at Rs. 10,360/-. The perusal of assessment order reflects that the assessee had admitted before the Assessing Officer to adopt the cost of acquisition at Rs. 10,360/-. In view of the admission of assessee, there is no merit in the ground of appeal raised by assessee in this regard. Hence, the same is dismissed. Claim of deduction u/s 54F - non deposit to an account of specified bank or institution - Held that:- The assessee is not entitled to the claim of deduction under section 54F of the Act as the assessee has failed to deposit the unutilized amount of capital gains in the capital gains scheme account by the date of filing of return of income. - Decided against assessee.

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• 2019 (1) TMI 1201
  Deduction u/s 80P for Interest on Bank deposits with nationalized banks - Held that:- In the present appeal is squarely covered by the order of Tribunal in assessee’s own case relating to assessment year 2012-13 wherein the Tribunal has in turn, relied on various orders of Tribunal and held that the assessee is entitled to claim the benefit under section 80P on the interest income earned from nationalized banks. - Decided in favour of assessee.

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• 2019 (1) TMI 1200
  Levy of penalty u/s 271(1)(c) - non disclosure of sale of house property - exemption u/s 54 claimed - defective notice - Held that:- AO before levy of the penalty u/s 271(1)(c) of the Act issued show cause notice to the assessee wherein AO was not sure as to under which limb of section 271(1)(c) of the Act penalty proceedings have been initiated in the assessment order. In the said notice the AO has mentioned “have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1,2,3,4 and 5”. In this notice the AO has mentioned both the limbs of section 271(1)(c) of the Act that assessee have concealed the particulars of the income or furnished inaccurate particulars of such income. AO has not specified in the notice as to under which limb of section 271(1)(c) of the Act a show cause notice has been issued against the assessee for levy of the penalty. See COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SUPREME COURT] - Decided in favour of assessee.

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• 2019 (1) TMI 1199
  Variation in the income or loss returned by the assessee - No draft order passed u/s 144C(1) - whether there any variation in the income or loss returned by the assessee and the AO not having passed draft assessment order had violated the provisions of section 144C(1) - Held that:- The assessee suo motu and in good faith claims to have offered additional income to tax at the beginning of assessment proceedings itself. The assessee claims that the said offer was made even before the questionnaire was raised. In such scenario, when the Assessing Officer passes the order after including sum of Rs. 62,12,060/- to the receipts offered in the return of income, then income totals to Rs. 12,38,01,862/-. AO has assessed the aforesaid income in the hands of assessee under section 143(3) of the Act. Variation in the income is not on account of any addition made by the Assessing Officer but is on account of voluntary offer of additional income by the assessee and it cannot be said that the Assessing Officer has made variation in the income returned, which is prejudicial to the interest of such assessee. The variation in the income is qualified by the words which is prejudicial to the interest of such assessee. Addition, if any is made to the returned income is on account of suo motu offer by the assessee of the receipts received by the assessee during the year under consideration from an Indian entity and by an inadvertent error, the same were not offered in the return of income. So, it does fail the test of prejudicial to interest of assessee. Hence, there is no merit in the order of CIT(A) in quashing the assessment order. The same is thus, reversed. The grounds of appeal raised by the Revenue are thus, allowed. Rate to be applied at the relevant time under section 115A(BB) - amount of income tax calculated on the income by way of fees for technical services, if any, included in the total income were to be taxed @ 10% OR 25% - Held that:- The year under appeal is assessment year 2013-14. On the other hand, the Assessing Officer refers to an amendment to the Act which is w.e.f. assessment year 2014-15, under which tax is to be charged @ 25%. AO was of the view that since the return of income was filed on 25.03.2015, then rates which are prescribed w.e.f. 01.04.2015, the same are applicable. First of all, we hold that there is no merit in the order of AO in not applying the rate of 10% to the income returned by the assessee under specific provisions of section 115A(BB) for the relevant year. It may be pointed out herein itself that the Finance Act, 2015 w.e.f. 01.04.2016 had re-substituted the rate of tax @ 10% as against 25%. No merit in the order of AO in applying rate of tax @ 25%. Without prejudice to the same, the learned Authorized Representative for the assessee has pointed out that the rate as per DTAA is 15% to such receipts and in view of provisions of section 90(2) of the Act, beneficial provisions are to be applied; so at best the rate which could be applied was 15%. Accordingly, we allow the plea of assessee and direct the Assessing Officer to apply the rate of tax at 10% plus surcharge and cess as prescribed under section 115A of the Act. The grounds of objections raised by assessee are thus, allowed.

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• 2019 (1) TMI 1198
  Addition u/s 68 - bogus long-term capital gain from the sale of shares - non providing opportunity to cross examine parties relying=g on whom addition is made - Held that:- ssessee produced before the learned Assessing Officer that the documents submitted by him, namely, the contract note dated 18/08/2014 for sale of shares of M/s Unno industries Ltd in BSE through registered stock broker M/s Rudra Shares and Stockbrokers, Bank statement of the assessee from 01/08/2014 to 31/08/2014 and 01st December, 2014 to 31st December 2014 showing that the consideration of sale of shares was received. Confirmation by various trade links private limited on 27th March 2012 and the share bill dated 22nd June, 2011 - would prove the genuineness of the transaction. The identity of the parties is not under cloud and genuineness of the transaction is explained by way of above documents. Learned Assessing Officer never suspected the capacity of the assessee for purchase of the shares. As a matter of fact, the statement of transactions issued by M/s Religare Securities Ltd clearly establishes that the assessee was holding a sizeable portfolio and it is not the stray incident of purchasing one scrip for this purpose only. There is no allegation as to the incorrectness of the documents or manipulation by SEBI or BSE. Hon’ble Apex Court in the case of M/s Andaman Timber Industries vs Commissioner of Central excise [2015 (10) TMI 442 - SUPREME COURT] for the principle that the failure to provide the assessee the right to cross examine the witness whose statement are relied upon, results in breach of principles of natural Justice and is a serious flaw which renders the order a nullity. In this case also an opportunity for the cross examination of the persons, on whose statements the learned AO based his suspicion was not allowed to the assessee, so that the assessee could have defended himself from the allegations, if any, made against him. In these circumstances, mere suspicion of AO does not take the place of legal proof of any bogus transaction. It shall be kept in mind that the assessee held the shares quite for a long time between 22nd of June 2011 till 23re March, 2012 bonus shares were allotted and subsequently deposited them in the demat account on 10/09/2012. We find it difficult to sustain the impugned order. We, accordingly, while agreeing with the contentions of the assessee direct the learned Assessing Officer to delete the addition - Decided in favour of assessee.

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• 2019 (1) TMI 1197
  Change in method of accounting - selling CPE to the subscriber - company shifted its policy from selling CPE to the subscriber to leasing this equipment to the customer on payment of refundable security and a lease rent for five years - assessee compensated this fall in prices and debited the same in its Profit and loss account as related to excess/short amount received from the consignees on account of scheme conversion - AO treated this as a non- Revenue expenditure, whereas the first appellate authority has directed the Assessing Officer to allow the same as business loss - CIT(A) accordingly directed the Assessing Officer to allow 1/5th expenditure and balance amount would be allowed for the next four financial years - Held that:- We are of the considered opinion that once the CIT(A) has accepted that distributor’s commission and distributor’s incentive are revenue expenditure, there is nothing like deferred revenue expenditure. Moreover, the distributor’s commission and incentive paid by the assessee will not be recovered if the lessee i.e. the customer cancels the lease after one year. Therefore, any commission/incentive paid by the assessee has to be charged to the profit and loss account as revenue expenditure in the year of incurring the same. We, accordingly, modify the findings of the CIT(A) and direct the Assessing Officer to allow distributor’s commission and distributor’s incentive as revenue expenditure. Allowability of freight and cartage outward - nature of expenditure - holding it as capital loss/capital expenditure or revenue expenditure - Held that:- AO has misunderstood the facts of the issue. He was carried away by the capitalisation of freight inward expenses and accordingly, treated freight and cartage outward as capital expenditure. At this stage, we would like to make it clear that freight inward is paid when the goods are unloaded and transferred to the godown. Such expenditure is definitely part of the goods so unloaded and the same needs to be capitalised. Freight outward, on the other hand, is expenditure incurred when the goods are loaded to transport to the destination of the customer. Such expenditure is directly related to the sales and have to be allowed as Revenue expenditure. Disallowance of handling charges - nature of expenditure - revenue v/s capital expenditure - Held that:- Facts on record show that these expenses have been incurred for dispatching set top boxes to various destinations during the course of normal business activity of the assessee. In our considered opinion, such expenditure has not resulted in any acquisition of any capital asset by the assessee. On the contrary, such expenditure has been incurred for despatch of trading stock of the assessee. We, accordingly, direct the Assessing Officer to delete the impugned addition.

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• 2019 (1) TMI 1196
  Reopening of assessment - long-term capital gain - possession of property - assessability of long term capital gains tax in the hands of assessee in the captioned assessment year - Held that:- In the present case, on receipt of Rs. 1 lakh and postdated cheques of Rs. 37 lakhs, which were never encashed, the possession of property remained with the assessee; the buyer Joshaba clearly admits that it never received possession. In such circumstances, where the possession of property has not been handed over and even the complete consideration for the property has not been received by the assessee except for advance of Rs. 1 lakh, then the Revenue authorities have erred in holding that transfer had taken place in financial year 2007-08 on the date of signing of deed of assignment. There may be a document by which certain rights were transferred but once the possession of property has not been handed over, the assessee does not become liable to pay capital gains tax on such transaction as the conditions laid down in section 2(47)(v) have not been fulfilled. Accordingly, order of CIT(A) is reversed in this regard and hold that no income from long term capital gains is to be assessed in the hands of assessee.

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• 2019 (1) TMI 1195
  Nature of receipt - Addition being Grant/Financial Assistance received from the Government of Chhattisgarh - Revenue Receipt OR Capital Receipt - Held that:- Each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee. As undisputed that all throughout the years, assessment was completed u/s.143(3) of the Act and the subsidy has been accepted as ‘Capital Receipt’. If in this assessment year i.e. 2014-15,the assessment was something erroneous and prejudicial to the interest of the Revenue then the Ld. CIT(Appeals) could have resorted to revisionary jurisdiction u/s.263. This is not done in the case of the assessee which means that Revenue has all throughout accepted that assessment was completed in the case of the assessee u/s.143(3) and the facts that the subsidy received are capital in nature. Then in similar facts and circumstances in the present assessment year i.e. 2014-15, in absence of any new material and evidence, taxing subsidy as ‘Revenue Receipt’ by the Revenue Authority is the exercise which can be termed as arbitrary, unjudicious, unwarranted and bad in law and therefore, liable to be deleted. - decided in favour of assessee.

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• 2019 (1) TMI 1194
  TPA - comparable selection - Held that:- It is observed that assessee included companies having financial data of at least 2 years prior for which Ld.TPO observes that as per Rule 10 B (4) it is mandatory to use current year data, unless it is shown by assessee that such earlier years data has an influence in determining transfer price and that, use of earlier year data is in addition to current year data. Ld.TPO rejected company, where current year data was not available and assessee had sought to rely upon preceding two years data, which in our considered opinion is appropriate as assessee has not been able to establish what is required under rule 10 B (4) of Income Tax Rules 1963. Next filter that has been modified by TPO is in respect of turnover. Assessee had included companies with an average sales of less than 1 crore during the year and companies with more than 50 crores were rejected. TPO observed that companies whose income is less than 5 crore would be appropriate as otherwise analysis may not lead to proper compatibility. It is observed that TPO modified lower limit of turnover filter from less than 1 crore to less than 5 crore. TPO rejected companies which are making losses as comparables. This shows that there is a limit for lower end for identifying comparables. In such a situation, we are unable to understand as to why there should not be an upper limit also. What should be an appropriate upper limit is another factor to be considered. Big company would be in a position to bargain price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, turnover also would come down reducing profit margin. Thus, as held by various benches of this Tribunal, when companies which are loss making are excluded from comparables, then super profit making companies should also be excluded. Thus in present case, rage of 1 crores to 200 crores would be ideal. For purposes of classification of companies on the basis of net sales or turnover, we find that a reasonable classification has to be made. In our opinion companies with revenues less than 75% from software development services would be ideal to be excluded, as economic circumstances of such companies would be different. We draw our support from Rule 10 B (2) in respect of this view. Assessee is into rendering of software development services like that of assessee thus these companies functionally dissimilar with that of assessee need to be deselected from final list.

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• 2019 (1) TMI 1193
  TDS u/s 194LA - Exemption u/s. 10(37) - Interest received u/s 28 in case of compulsory acquisition of agricultural land as nature of interest income or it is a part of enhanced compensation - Held that:- Issue in dispute in the present appeal is squarely covered in the case of Jagmal Singh vs. ITO [2018 (9) TMI 1468 - ITAT DELHI] it is not a case of Revenue that the assessee has not received interest u/s 28 of the Land Acquisition Act, 1894. This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs. Hari Singh (2017 (11) TMI 923 - SUPREME COURT) wherein it is held that on agricultural Land no tax is payable when the compensation/enhance compensation is received by the assessee as their land was agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. Therefore, the same comes under the purview of Section 28 of the Land Acquisition Act. - decided in favour of assessee

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• 2019 (1) TMI 1192
  Revision u/s 263 - order passed under section 147 r/w 143(3) as erroneous in so far as prejudicial to the interest of Revenue - identity, genuineness and creditworthiness of the transacting parties who have contributed to share capital/ share premium during the year under consideration and to furnish the basis of valuation/ working of the share price and share premium rates at which such subscription were received by the assessee - Held that:- There is no finding regarding determination of fair market value of shares and consequent determination of share premium and thus the genuineness of the transaction where the shares have been issued at a premium. CIT-A has in fact examined these documents so submitted by the assessee and has given a finding that genuineness of transactions and creditworthiness of 15 companies out of total 18 companies have not been examined and verified by the AO. In particular, she has stated in her order that where the bank statements of these 15 companies are not submitted during the reassessment proceedings, how the AO has arrived at a conclusion that these investee companies have the requisite creditworthiness to subscribe to shares at a premium at the relevant point in time when the investment were made is not emanating from the records. Further, it is not a case where there was an audit objection and a different view so suggested by the auditor has been blindly applied by the CIT. No doubt, there was an audit objection in the present case but at the same time, there was lack of adequate enquiry on part of the AO and the ld CIT has given a specific finding in this regard on examination of documents so submitted during the course of assessment proceedings. No infirmity in the order of the CIT exercising her jurisdiction under section 263 of the Act in holding the order passed under section 147 r/w 143(3) as erroneous in so far as prejudicial to the interest of Revenue - decided against assessee.

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• Customs

• 2019 (1) TMI 1191
  Export of prohibited item - huge quantity sent as Baggage - detailed examination of the baggage revealed that it consisted of 537 wood blocks of total weight 10,652 Kgs. which is less than the net weight 11,230 Kgs. as mentioned in the shipping bill - It was also pointed by him that wrong HS code and description were given by the CHA - penalty on appellant as well as on CHA - permission to export the goods - Held that:- Admittedly, appellant Mr. Bernard Maurice Gerard Kuhne death with effect from 21.10.2009 has been acknowledged by this Tribunal but penalty continue to be in force as no express order was passed to that effect. Penalty being punitive in nature admittedly gets abated on the death of the person and in view of such legal position, penalty of Rs. 2,00,000/- imposed on deceased Bernard Maurice Gerard Kuhne is abated on his death that occoured on 21.10.2009. Penalty on other appellant have been set aside vide earlier order of this Tribunal and therefore the issue of confiscation of goods by the respondent department is required to be scrutinised in this appeal to determine its legally. Statement of the Partner of CHA Mr. Parvez Jehangir Irani was relied upon by the respondent Department to arrived at the conclusion that RITC number was mis-quoted as 44072910 instead of 44011000 but going by the relevant provisions of Section 3 & 11 of the Foreign Trade (Development & Regulation) Act, 1992 as well as Chapter 44 under Schedule-II of EXIM Policy, it can very well be said that CHA had intended the same to be Burmese imported teak wood made exclusively out of imported old and used wood and quoted it under RITC No. 44072910 for which export policy permits free export for imported logs/timber of all species other than CITES. The said statement is not submitted by either of the parties for scrutiny but as found from the record is that CHA had mistakenly declared it as Indian wood instead of imported Burmese teak wood - Further, even if the contention of the Commissioner of Customs is accepted that CHA partner admitted that the tariff items HS code should be 44011000, since item description covered under prohibited wood does not cover blocks that to made exclusively out of imported logs/timber, I have got no hesitation to conclude that the goods under confiscation, which the Assistant Commissioner of Customs, ICD Mulund (Export) informed to have been kept in container number TR2311935, are not prohibited goods that can be subjected to confiscation. The confiscation order is held as not in conformity to law and substituted appellant is here by permitted to export the goods to her home country the Netherlands - appeal is allowed and order passed by the Commissioner of Customs (General), Mumbai is here by set aside.

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• 2019 (1) TMI 1190
  Benefit of exemption under N/N. 12/2012-Cus dated 17.03.2012 - Import of Gold dore bar falling under Customs tariff Item 7108 12 00 - the imported goods were produced by M/s Philippine Associated Smelting and Refining Corporation ( PASAR ) which is a copper smelter and refinery and is not a mining company or laboratory attached to the mining company - revenue has denied exemption on the ground that the condition no. 34 (b) and (c) of the serial No. 318 of the Notification No. 12/2012 Cus dated 17.03.2012 was not followed by the Appellant and hence not eligible for exemption - Held that:- We find from the case papers that the undisputed fact is that the PASAR is controlled entity of Glencore which is involved in mining. The copper concentrate is sourced by PASAR from Glencore and used in its refining and smelter plant. It also has sulphuric acid plant and a dore plant which produced alloy of gold and silver. M/s Glencore holds 78.2% of the shareholding of PASAR and the production of PASAR is counted as production of Glencore. It is common for an entity to have its economic activity divided into various subsidiary companies. In the present case it is not in dispute that Glencore after mining of copper concentrate is getting the same refined and smeltered at PASAR which is its own subsidiary. Only for the reason that both the concerns are working under different set up, it does not take away the fact that PASAR is part of Glencore. Therefore there is no difference or distinction between the mining company and the producer company. The condition 34 (b) of the notification states that the goods are to imported in accordance with the packing list issued by the mining company by whom they were produced. Further the condition 34 (c) states that the importer has to produce before the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, an assay certificate issued by the mining company or the laboratory attached to it, giving detailed precious metal content in the dore bar. The assay certificate was issued by Glencore who is itself a mining company. The assay certificate cannot be denied on the ground that it is a provisional certificate. Also, the conditions of the notifications should be construed liberally and should not be so read that it leads to defeat of purpose of the notification. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1189
  Import of coking coal or not - provisional assessment - case of Revenue is that the provisional assessment was not ordered merely for test report but also because no original document was produced at the time of assessment by the appellant.. The root of the dispute is if the product imported is "coking coal or not? Held that:- As far as the period when the imports were made is concerned, there was no definition or description prescribed under the Customs Act or Tariff with respect to “Coking Coal”. It is seen that the supplier has described the product as “Coking Coal” in the invoice. The test report which accompanied the consignment describes the product in the general description as Indonesian Coking Coal N Bulk - The chemical examiners reports or the orders of lower authorities do not identify the parameters which are used to differentiate between them. We find that significant merit in the argument of Ld. Counsel. Nowhere in the proceedings, Revenue (or for that matter the importer) has produced any concrete literature which describes “coking coal” and identifies parameters that differentiate between “coking coal” and other coals - In these circumstances, it would not be possible to finalize the issue. The impugned order is, therefore, set aside and the matter is remanded to the original Adjudicating Authority, to decide afresh after identifying specific parameters duly supported by literature on which they wish to rely on for differentiating between “coal” and “coking coal” - appeal allowed by way of remand.

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• 2019 (1) TMI 1188
  100% EOU - warehousing of goods - completion of warehousing period - failure to fulfill export obligation - N/N. 13/81-Cus dated 9th February 1981 read with N/N. 53/97-Cus dated 3rd June 1997 - Held that:- The export oriented unit scheme has undergone changes over a period of time and, more significantly, during the tenor of the letter of permission of the appellant. The amending notifications issued under Customs Act, 1962 and Central Excise Act, 1944 superceded, and substituted, the existing notifications. Hence, the condition subject to which the goods were imported were not the same for the respective years of evaluation for compliance to determine the continuance of the privilege of duty exemption on capital goods and recovery of duties. We hold that the duty liability, if any, should be with reference to N/N. 52/2003-Cus. In the present dispute, the proceedings appear to have originated with completion of the period of warehousing which should be applicable only if warehoused goods were never put to use and, on completion of the warehousing period, the duty liability would be computed on value as assessed originally without benefit of depreciation. In the present circumstances, owing to utilization, depreciation is not deniable. The depreciation over the entire tenor would result in nil value for the purpose of assessment. Accordingly, the finding on the duty liability of the capital goods is not correct in law. The demand of duty and imposition of penalty is without the authority, and support, of law - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1187
  Condonation of delay of 1233 days in filing appeal - the remand instructions in Commissioner (Appeals) dt. 27.02.2015 sought to be appealed against by the appellant, has already been acted upon by the authority below and a decision inter alia directing to pay up the demanded amount along with interest has been thereafter issued by the Deputy Commissioner - Held that:- The order of Commissioner (Appeals) dated 27.02.2015 had disposed of the appeal of appellant by directing the lower authority, as pointed out by Ld. A.R, to seek suitable clarification from the Board. That was done, albeit after nine months from the said order, on 26.11.2015. The clarification from the Board was issued in F.No.341/30/2012-TRU on 22.12.2015. The Deputy Commissioner thereon vide a letter dt. 12.04.2016 had conveyed the said clarification and directed the appellant to pay up the demand amount along with interest immediately - the remand instructions in Commissioner (Appeals) dt. 27.02.2015 sought to be appealed against by the appellant, has already been acted upon by the authority below and a decision inter alia directing to pay up the demanded amount along with interest has been thereafter issued by the Deputy Commissioner. The appellant cannot have any grievance against the order of the Commissioner (Appeals) since that has been acted upon. The appropriate appellate authority for the aforesaid mentioned order / decision of Deputy Commissioner dated 12.04.2016 will only be the Commissioner (Appeals) and appellant cannot jump the gun by filing an appeal, before this Tribunal - As the instant appeal itself cannot lie before this Tribunal, there will obviously be no point in considering the application for condonation of delay - COD application is dismissed - the appeal is also dismissed being not maintainable.

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• 2019 (1) TMI 1186
  Penalties - EPCG Scheme - non-fulfilment of export obligation - case of appellant is that mention of EPCG license of Rogini by these appellants is only by inadvertence - penalty on CHA on the allegation of abetting the mis-declaration detected in the aforesaid exports. Penalty under Section 114 (iii) ibid on Uttam and Network - common plea of both the appellants is that since Rogini Garments were supplying yarn for the manufacture of the exported goods, the latter is their supporting manufacturer; hence their EPCG licence details were indicated in the shipping bills by mistake - Held that:- The adjudicating authority in para-31 of the impugned order, while confirming the fact of mis-declaration in the shipping bills by both the appellants, has observed that appropriate proceedings on further investigations will have to be initiated by the concerned Customs House, where the EPCG licenses relating to Rogini have been registered. There is also no discrepancy or mis-declaration in the description and value of the goods sought to be exported - the ends of justice will be adequately served by reducing penalty imposed under Section 114 (iii) of Uttam and Network from Rs. 5,00,000/- each to Rs. 1,00,000/- each. Mis-declaration of the documents filed by Network and Uttam - there is also an allegation that Dachser had allowed Rogini Garments to endorse the shipping bills - Held that:- No evidence of any sort had been adduced to support these allegations. Even in the impugned order, in Para-28 the adjudicating authority has entertained the presumption that Dachser failed to exercise due diligence on the exporters and consequently played an active role in the mis-declaration by the latter. We are afraid that such a presumption is not sufficient to establish the charge of abetment under Section 114(iii) ibid. Confiscation of goods - redemption fine - Held that:- The adjudicating authority should have correctly proceeded to order confiscation of the goods and imposed redemption fine under Section 125 ibid thus gives an option for the exporters to redeem the goods. This has not been done. We therefore order modification of the impugned order in respect of paras 32 (i) and 32 (iv) to order that the goods impugned therein are confiscated under Section 113 (i) ibid. We further hold that the goods should be released on redemption fine under Section 125 ibid - the quantum of redemption fine would have to be commensurate not only on the value of the goods but also to some extent with the margin of profit of the goods and other ingredients - a redemption fine of Rs. 1,00,000/- each under Section 125 ibid on Network and Uttam would sufficiently meet the ends of justice in these cases. Appeal disposed off.

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• Insolvency & Bankruptcy

• 2019 (1) TMI 1185
  Corporate insolvency resolution process - procedure in relation to the initiation of corporate insolvency resolution process - maintainability of the application - proof of outstanding financial debt - genuity of loan transaction - Held that:- Mere grant of loan and admission of taking loan will ipso facto not treat the applicant as "financial creditor" within the meaning of section 5(8) of the Code. Precisely "financial debt" is a debt along with interest, if any, which is disbursed against consideration for time value of money. In the present case the applicant has relied upon the loan agreement dated May 11, 2007 in support of the pleading that the loan was disbursed against consideration for time value of money. Admittedly original of the disputed loan agreement dated May 11, 2018 has not been placed on record. Normally the original loan agreement is always kept by the lender. Despite serious dispute on the very existence of the loan agreement, applicant has failed to explain as to how ; under what circumstances and since when the loan document was given to the borrower. Except a word of mouth, no acknowledgment or papers in this regard have been placed. Neither original loan agreement has been produced nor proper explanation is on record. It is the duty of the applicant to plead and produce evidence, we are constrained to draw adverse inference, in the absence of original loan agreement and for want of adequate explanation in this regard. Additionally, the respondent has placed reports of two experts dated July 29, 2018 and August 4, 2018 respectively in support of the contention that the alleged loan agreement dated May 11, 2007 is a forged one. The applicant has failed to explain as to why the expert opinions are to be ignored. It is also pertinent to note that in the loan agreement it is specifically mentioned that on the date of loan agreement the respondent was a subsidiary of the applicant. However, the respondent has placed on record the annual return of the company for the year ending March 31, 2008 to show that the company was incorporated on March 29, 2007 and that as on May 11, 2007, i.e., on the date of the loan agreement the petitioner was not a shareholder of the respondent-company and the respondent was not a subsidiary of the applicant. This fact also creates doubt on the genuineness of the loan agreement. It is further seen that the stamp paper on which the loan agreement was prepared is dated March 20, 2007. However, the respondent-company was incorporated on March 29, 2007, i.e., about 9 days after the purchase of the stamp paper. This also creates a doubt, as the stamp paper was purchased for a transaction with a company which was not even in existence on that date. Thus in the absence of the original loan agreement and in the light of serious dispute and allegation of fraud ; it appears that the matter requires proper trial and investigation. Admission of the application under the Code has serious civil consequences. Heavy onus lies on the applicant to prove the claim of interest component, date of default and as to when the repayment is due. Simply, relying upon the copy of a seriously disputed document would not suffice in the present summary proceedings. For the reasons stated above this petition fails and the same stands dismissed as not maintainable.

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• 2019 (1) TMI 1184
  Excessive payment to Interim Resolution Professional - payment of Rs. 5 lakh to Interim Resolution Professional for his working for 30 days is excessive and arbitrary? - Held that:- The consolidated amount of Rs. 6 lakh has been charged jointly for the firm -‘Ensemble Resolution Professionals Pvt. Ltd.’ and the ‘Interim Resolution Professional’ and not towards the fee of ‘Interim Resolution Professional’. Admittedly, the Applicant (Financial Creditor) had not fixed the expenses to be incurred by the Interim Resolution Professional. As per Sub-regulation (2) of Regulation 33, the Adjudicating Authority was required to fix the expenses which includes the fee to be paid to the Interim Resolution Professional and other expenses. The application under Section 7 was admitted on 13th June, 2018. The copy of which was received by the Interim Resolution Professional on 20th June, 2018. Finally the proceeding was terminated by judgment of this Appellate Tribunal dated 17th July, 2018, thereby we find that the Interim Resolution Professional has worked for 27 days. We find that the ‘Interim Resolution Professional’ has performed duty only for 27 days and not incurred any expenses, except for travelling allowance which he is entitled to, we hold that Rs. 5 Lakh (Rupees Five Lakhs Only) allowed by the Adjudicating Authority is excessive. Adjudicating Authority has failed to notice that claim of Rs. 6 Lakh (Rupees Six Lakhs Only) was made by the firm namely ‘Ensemble Resolution Professionals Pvt. Ltd.’, payable to the Interim Resolution Professional. As the aforesaid firm is not eligible or entitled to receive any fees or any cut or commission from the fees of the ‘Interim Resolution Professional’, demand of Rupees Six Lakhs cannot be accepted. Taking into consideration the facts and circumstances of the case, we are of the view that a sum of Rs. 1.5 Lakhs (Rupees One Lakh Fifty Thousand) should be paid in favour of the ‘Interim Resolution Professional’ for his functioning for period of 27 days (which is approximately 30 days). In addition Rs. 25,000/-, is allowed towards travel expenditure, if any, incurred by the Interim Resolution Professional. Thus, Interim Resolution Professional is allowed a sum of Rs. 1.75 Lakh (Rupees One Lakh Seventy Five Thousand Only) to be paid by the Appellant (Corporate Debtor), which should be paid within two weeks. The impugned order dated 10th August, 2018 stands modified to the extent above.

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• 2019 (1) TMI 1183
  Initiation of the corporate insolvency resolution process - pre-existing dispute between the parties before receipt of demand notice - Whether claim is barred by limitation ? - Held that:- The date of last payment made to the applicant by the corporate debtor is relevant for the purpose of limitation is May 4, 2015 hence, limitation expired on May 4, 2018. Further reliance of counsel for the applicant on the date of demand notice, April 17, 2018 is misplaced, because date on which this petition is filed is August 20, 2018 and limitation is to be counted from the date of last transaction to filing of this petition, which is on August 20, 2018 whereas limitation expired on May 4, 2018. Hence this claim is barred by the limitation. The reply of corporate debtor to the demand notice cannot be taken as acknowledgment of the debt. To the contrary, the corporate debtor has denied the claim calling it false and reiterated their counter claim of Rs. 1,17,80,951 on account of extraordinary delays in delivery/non-delivery along with interest conveyed vide e-mail dated July 23, 2015. Therefore, it is held that the claim is time barred. The documents on record that the supplies were delayed not only as per original supplies schedules but also as per the mutually agreed upon revised schedule. The respondent has placed on record the document to demonstrate the loss due to abnormal delay and non-supply of the goods from the applicant which resulted in selling the consignment at a discount and also cancellation of orders. The claim for loss was conveyed to the applicant on July 23, 2015, i.e., much prior to the issue of the demand notice. Thus it is clear that the dispute existed on July 23, 2015 much before the demand notice was served on April 17, 2018. Following the principle laid down by the hon'ble Supreme Court in the matter of Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd. [2017 (9) TMI 1270 - SUPREME COURT OF INDIA] and in view of the above discussion, it is held that there was an existing dispute between the operational creditor and corporate debtor much prior to the issuance of demand notice. Further this claim is also barred by limitation, hence this application is liable to rejected.

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• PMLA

• 2019 (1) TMI 1182
  Offence under PMLA - provisional order of attachment of the properties made under sub-section (1) of Section 5 - Attachment of the Moveable/immoveable property which has been Hypothecated/Mortgaged with the Appellant Bank is that proceeds of crime received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s NakodaLts and its factory building are “Proceeds of Crime" Held that:- There is no denial on behalf of respondent that appellant is a Secured Creditor and is entitled to priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. The Adjudicating Authority did not appreciate that a bare perusal of the afore mentioned section 2(1)(u) of PMLA very clearly stipulates that the property can be attached under the provisions ONLY WHEN, Such property has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence. The complainant has failed to prove/establish that the immoveable property that has been lawfully Mortgaged with the Appellant Bank has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence. The only reason given by the Respondent No.1 in the present OC 974/2018 is that proceeds of crime amounting to Rs. 827.98 Cr. received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s Nakoda Ltd and its factory building are “Proceeds of Crime and the Factory land of M/s Nakoda is also liable for attachment under PMLA as “Value of Such property." It is admitted position that the said movebale/immoveable property is not a property that has been derived or acquired, directly or indirectly through the “Proceeds of crime”. Thus, the said mortgaged property in which the bank is the secured creditor is not liable to be attached in lieu of even value therefore. Therefore, the OC 974/2018 is not maintainable as the Respondent No.1 had no jurisdiction to attach the aforementioned immoveable property under the provisions of the PMLA and that the PAO bearing No. 01/2018 is quashed against the appellant. The Adjudicating Authority did not consider that the provisions of The Prevention of Money-Laundering Act, 2002 cannot be construed and implemented to the detriment of third parties having no connection with and involvement in the scheduled offences which fall within the domain of the Act. The provisions of the Act can only entail penal consequences on those who are guilty of committing of scheduled offences. The rights of a third party having no involvement in the scheduled offences cannot be jeopardized and decimated by the operation of Act as the same would be violative of their legal right under bond fide contracts. Appeal allowed.

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• 2019 (1) TMI 1181
  Offence under PMLA - Provisional Attachment Order - property purchased as proceeds of crime - assessee is an educational institution - Held that:- It is admitted position that the appellants are neither arraigned in any schedule offence nor in any charge-sheet. The appellants are running educational institutions and the Respondent has issued the impugned attachment order and complaint on the erroneous premise of “any property” of “any person” without focusing its attention as to first pre-requisites in law of existence of any “proceeds of crime” and availability of “material” to lead to “reasons to believe” as required under Section 5 of PMLA. In the present case, one fact is very clear that Adjudicating Authority has not at all considered the written submission submitted by the Appellants before him. The respondents and the Adjudicating Authority have miscarried itself in law by ordering attachment and confirmation of the attachment in the absence of any “proceeds of crime”. In the absence of proceeds of crime the very exercise of powers by the respondents under PMLA is beyond jurisdiction. The contentions of Appellants have not been met including denial of cross-examination. The properties of the appellants were attached towards value thereof. The said properties were not purchased from the proceed of crime. It is inter-se disputes between the appellants and Nilesh J. Thakur about the money parked at the hand of Kalyani Group. However, it is not disputed by any party that the said amount was originally owned by the SPCL which is not tainted even as admitted by the counsel for the ED. Thus, the question of proceed of crime or money laundering by any appellant in all appeals does not arise. The appellants properties, therefore, wrongly attached by the ED. Appeals allowed.

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• Service Tax

• 2019 (1) TMI 1180
  Benefit of N/N. 17/2011-ST dated 01.03.2011 - services consumed within SEZ - denial of benefit on the ground that appellant did not furnish declaration in Form A-1 for claiming the benefit of exemption in terms of the Notification - whether the denial of substantial relief be made for non-compliance with a procedure? - Held that:- The issue of providing service and the service being consumed at SEZ is not in dispute and it is also undisputed that the service recipient viz. M/s. Perlos closed down its business and hence, Form A1 could never be obtained and hence non-furnishing of Form A1 is not deliberate, which was beyond the control of the appellant. The Hon’ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. Vs. DC [1991 (8) TMI 83 - SUPREME COURT OF INDIA] has clearly laid down that procedural infraction of notifications, circulars, etc. are condonable and would not coming in the way of extending substantial benefit, if otherwise found eligible - Similarly in the case on hand, it is not that the appellant had not rendered the service which was consumed in the SEZ, rather the denial is made for non-compliance with a procedural requirement which according to me is not correct, in the light of the decision of the Apex Court. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1179
  Reverse Charge Mechanism - commission received by the appellant from the appellant’s service recipients located outside India - place of provision rules - export of services in terms of 6A of the Service Tax Rules, 1994 - whether the provision of service which was exempted from service tax by virtue of being an export service could become taxable after 09.10.2014? - Held that:- It is not the case of the Revenue that the appellant arranges or facilitates other services as well, in addition to the above, to its ‘Principals’ nor is the case of the Revenue that the appellant had suppressed the provision of any other service. The Revenue has also nowhere disputed the above service rendered by the appellant, ie., procuring/obtaining orders for its Principals located outside the taxable territory, for which the commission is paid by its Principals as also the fact of that obtaining orders from the Indian customers is the main and the only service rendered by the appellant. Rule 3 is the general Rule whereas, Rule 9 is specific and also covers ‘intermediary service’. Therefore, if the service of the appellant herein is held to be that of intermediary services, then Rule 9 will automatically apply. If not, Rule 3 will apply - Rule 2 (f) excludes the services of intermediary if the person whose main service is arranging or facilitating a provision of service, which also stands automatically excluded from the purview of Rule 9 and thus would fall under Rule 3. The facts of the case as analysed elsewhere in this order, make it clear that obtaining/procuring order for its foreign Principals is the main service rendered by the appellant and consequently, rigors Rule 9 vis-à-vis Rule 2 (f) are not applicable - Rule 3 of POPS Rules would only apply and therefore the appellant cannot be fastened with tax liability. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1178
  Valuation - Club or association service - principles of mutuality - inclusion of advance enrolment fee, subscription charges and other sums in assessable value - time limitation - Held that:- The issue is no longer res integra in view of the decision of Gujarat High Court in the case of Sports Club of Gujarat Ltd. [2013 (7) TMI 510 - GUJARAT HIGH COURT] and that of Jharkhand High Court in the case of Ranchi Club Ltd. [2012 (6) TMI 636 - JHARKHAND HIGH COURT] - It has been categorically held that in view of the mutuality of interest and in view of the activities of the club, if the club provides services to its Members that would not constitute service to others. In fact, Gujarat High Court has held the levy itself to be ultra vires of the constitution - various judgments have held that entry fees are subscription fees, mandap charges, charges for common effluent treatment, etc., have been held to be excluded from the purview of taxation. Charges collected from guests and non-members - Held that:- The appellant contended that the services rendered to non-members have come to be charged with effect from 5.1.2011 only. However, it is found that it was held by Jharkhand High Court in the case of Ranchi Club Ltd. that so far as services by club to other than members are chargeable as submitted by the petitioner therein. Therefore, in the instant case also, the charges like golf set hire charges and tournament surplus are collected from non-members - The above judgment was rendered in respect of the period prior to 5.1.2011. Therefore, the contentions of the appellants that charges collected from non-members are taxable only from 5.1.2011 are not acceptable. It cannot be said that principle of mutuality of interest is applicable in respect of non-members. For the sake of computation of such charges collected from non-members and the tax payable on the same, the issue requires to go back to the original authority - appeal allowed by way of remand.

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• 2019 (1) TMI 1177
  Extended period of limitation - no suppression of facts - CENVAT Credit - angles, channels, and other parts used to construct tower or shelters or affixation of towers are obtained in Completely Knock down (CKD) condition. At the site, they are bolted and placed on a platform either on the ground or on top of the building to ensure that there is no vibration to the towers and the same can be dismantled again and moved to a different place and erected again - movable goods or not. Held that:- The period of dispute is from 2009-2010 to 2011-12 whereas the show-cause notice was issued on 20.10.2014 which is completely barred by limitation. Further, the Revenue has invoked extended period of limitation on the ground that the appellant has suppressed the information from the Department whereas the fact of the matter is that the appellant have not suppressed any information from the department with the intention to evade payment of duty and they have been filing the returns showing the CENVAT credit on towers and tower materials. It is also a fact that this issue relates to interpretation of complex legal provision and the matter was referred to the Larger Bench who decided the same in favour of the Revenue - entire demand is barred by limitation and therefore, the entire demand is set aside. On merits, there is a conflict of decision between the Hon’ble High Court of Mumbai and the Hon’ble High Court of Delhi but since I am allowing the appeal of the appellant on limitation, I need not go to the merits of the case - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1176
  Refund of unutilized and accumulated CENVAT credit - rejection of refund on the ground that the conditions stipulated under Notification No. 27/2012 CE-(NT) dated 18.06.2012 read with Rule 5 of CCR, 2004 have not been fulfilled - scope of SCN - interest on delayed refund - Held that:- The impugned order is bad in law as it has traveled beyond the Order-in-Original and rejected the prayer of interest on altogether new ground which was not there in the Order-in-Original which is not permitted under law. Further, Tribunal in the case of Netapp India Pvt. Ltd. [2018 (4) TMI 478 - CESTAT BANGALORE] has already granted interest for delayed payment of refunds after following the judgment of the Apex Court in the case of Ranbaxy Laboratories Ltd. [2011 (10) TMI 16 - Supreme Court of India]. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1175
  Penalty - short payment of service tax - entire deficiency was made good alongwith the interest much prior the issuance of the show cause notice - applicability of sub-section (3) of Section 73 of the Finance Act - interpretation of statute - Held that:- The bare perusal makes it clear that the word used in Section 73 (3) of the Finance Act is “shall”. Thus, the legislature has mandated that where the duty, which has either not been paid or has been short paid, if stands paid, the Department mandatorily has not to serve any show cause notice upon such an assessee. The fact of the present case that the entire duty as has been proposed to be recovered from the impugned show cause notice stands deposited vide challan No. 00055 dated 18.03.2003. The interest has also been deposited vide challan No. 00003 dated 19.03.2003. The fact has very much been acknowledged in the show cause notice itself. the entire payment alongwith interest was made much prior the show cause notice dated 05.01.2017. There is no reason to deny the benefit of sub section (3) of Section 73 of the Act to the appellant. The intimation was also very much to the Department vide the letter on record dated 17.10.2015. Since the facts were to the notice of the Department, the Department was liable to issue show cause notice, during the normal period of one year. The Department is therefore opine to have wrongly invoked the extended period. Section 73 to sub-section (3) is held to be applicable to the given facts and circumstances - no penalty imposable - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1174
  Penalty - Short payment of Service tax - foreign remittances made to the Foreign Service providers for receiving various services as that of advertising & marketing, business auxiliary service, commission to travel agent service etc. - entire alleged duty alongwith the interest has already been paid that too prior to the issuance of the SCN - applicability of Section 73 (3) of the Finance Act - scope of SCN - Held that:- The Department has made emphasis on sub-section (4) thereof, but the perusal of show cause notice makes it clear that Section 73 to sub-section (4) has not been invoked. It has now been settled law that the Department is not allowed to go beyond the show cause notice, otherwise also section 73 sub-section (4) includes the cases where the short payment or non-payment by the reason of fraud, collusion, willful misstatement or suppression of facts - Mere non-payment or short payment for a particular period even till the time audit is not sufficient to prove the grave allegations as are contained in sub-section (4). It is rather the onus of Department to come forward to give some evidence of positive act on part of the appellant proving the appellants intend to evade the tax duty. Sub-section (4) of Section 73 is held not applicable to the present case - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1173
  Rejection of VCES-1 declaration - failure to make true declaration - it was alleged that substantially false declaration was made - case of Revenue is that that the submissions now advanced were never raised in reply to the show cause notice though sufficient opportunity was granted to the appellant to not only file a reply to the show cause notice but repeated opportunities were also given to the appellant to appear and explain - principles of natural justice - Held that:- It is true that the appellant did not file a proper reply to the show cause notice to explain the position nor the appellant availed the opportunity provided to it to appear in person and explain the correct position. However, from the submissions made by learned Counsel for the appellant and the documents that have been brought on record in the appeal, we feel it would be appropriate to remand the matter to the Commissioner for a fresh adjudication on the show cause notice dated 25 June, 2014 - The appellant is, therefore, permitted to file an additional reply to the show cause notice with supporting documents within a period of six weeks from today and if the appellant desires a personal hearing, the same may be given - a cost of Rs. 50,000/- is imposed on the appellant, which the appellant shall deposit within a period of one month from today - appeal allowed by way of remand.

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• 2019 (1) TMI 1172
  Valuation - transport of passenger by air service - Department was of the view that the appellants were not paying service tax on the gross amount received by them from their customers under the category of transport of passenger by air service - Held that:- The matter is no longer res integra as the issue has already been decided by this Tribunal in the case of M/s. Royal Jordanian Airlines and others vs. CST, Delhi [2017 (11) TMI 1407 - CESTAT NEW DELHI], where it was held that in the case of M/s Continental Airlines Inc. Versus Commissioner of Service Tax, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELHI], where the Tribunal held against the inclusion of these charges in the taxable value for air travel service by the appellants - demand set aside - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1171
  CENVAT Credit - input - Cement, M.S. Plates, M.S. Channels etc. used for construction of factory shed, building or laying of foundation or making of structures for the support of capital goods - Held that:- The plain reading of the amended explanation in the definition of Input, makes it clear that the opening line for Explanation 2 is about the input including goods as are used in the manufacture of the capital goods used in the factory of the manufacturer. It becomes clear that the explanation is exclusively in respect of the manufacture only, that too when it is used for construction of factory shed, building or laying of foundation or making of structure etc. The use of word factory shed further clarifies that the explanation is exclusively for the manufacturer and not for the service provider. Thus, by taking inference from the above said explanation, credit in respect of inputs, which is undisputedly used for providing output service namely errection, commission, installation, the credit cannot be denied to the service provider i.e. the appellant. The findings of Commissioner (Appeals) in para 7 thereof do not help the Revenue as the exclusion made under the explanation to definition of input service does not extend to the service provider - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1170
  Ancillary service to GTA service - transportation of goods by road service, cargo handling, weighment charges and trailer detention charges - applicability of Place of Provision Rules - Held that:- It is a matter of record that the services as provided by the appellant, such as, empty transportation of containers, trader detention charges, cargo handling charges, weighment charges etc. are ancillary to the main activity of the transportation of the goods service - Since, it is a settled principle that the ancillary services are to be classified with the main service which is goods transport by road service in this case and as the bills have also been raised on the consignor or consignee who are paying the freight for the goods transportation then as per the provision of Section 68 readwith Rule 2 (1) (d) (5), the person who is paying the freight has to pay the service tax on the goods transport agency service inclusive of all the charges of ancillary services provided. The SCN itself has wrongly been issued to the appellant as the liability to pay the service tax on the goods transport agency service charges inclusive of ancillary services should have been raised on the person who has paid the freight - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1169
  Valuation - Servicing of Motor Vehicles - inclusion of reimbursement expenses in assessable value - Department was of the view that the expenses incurred by the dealers, like the appellant herein, for providing free services during warranty period are reimbursed by the manufacturer of vehicles - Held that:- The issue as to taxability of the reimbursable expenses has finally been laid to rest by the Hon’ble Supreme Court in the case of UOI Vs Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] where it was held that only w.e.f. 14.05.2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of value of taxable services for charging service. The CESTAT Chennai in Dream Loanz Vs CCE Coimbatore [2017 (5) TMI 1464 - CESTAT CHENNAI] held that the reimbursable out-of-pocket expenses are not includible in gross value of taxable services, not being amounts charged by service provider for such services. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1168
  Classification of service - Cargo Handling Service or Business Auxiliary services? - activity of loading and unloading of transportation of ore within the mining area - Held that:- The activity that was conducted by the appellant was loading of different types of finished crushed products from the place of crushing located in the crushing unit and shifting/ transportation of the finished crushed product up to a maximum distance of 500 meters from the crushing plant to the designated place within the mining area - there is no hesitation in accepting the contention of the learned counsel for the appellant that the transportation of the ores located at different locations within the mining area would not fall within the definition of ‘Cargo Handling services’. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1167
  Classification of services - port services or Renting of Immovable Property service? - compensation received by the respondent from ONGC - In consideration for allowing ONGC to lay sub-marine pipelines through the Port Trust limits, the respondent was paid compensation - scope of SCN - Held that:- The show cause notice was issued to the respondent, seeking for confirmation of the service tax demand under Port Services. For the first time, Revenue through this present appeal has raised a new ground regarding classification of service under the taxable entry of Renting of Immovable Property Service. Since classification under such service was never the subject matter of dispute before the lower authority and no specific show cause notice was issued to the respondent, alleging classification under such service, the Revenue is not permitted to take such new stand for deciding the appeal in its favour. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2019 (1) TMI 1166
  Refund of duties of central excise - discharge of duty liability under ‘protest’ - enhancement of assessable value - rejection of the refund claim on the ground of being barred by limitation of time prescribed in section 11B of Central Excise Act, 1944 - Held that:- The first appellate authority had not examined the merits of the appeal filed before him. It is also noted that the original authority had not held the claim to be barred by limitation of time but had rejected it on the premise that the dispute settled by the decision of the Kolkata bench of the Tribunal would not yield consequential relief to the appellant registered separately in the Mumbai jurisdiction. Hence, the first appellate authority had failed to restrict the proceedings to the appeal before him. The appellant has produced the challans pertaining to discharge of duty liability on which ‘protest’ has been clearly noted. There can, thus, be no doubt that the claim was not barred by limitation of time. Matter remanded back to the first appellate authority for a fresh decision on the merit - appeal allowed by way of remand.

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• 2019 (1) TMI 1165
  Clandestine removal - MS Ingots and MS TMT Bar - shortage of finished goods - comparison of figures in computer print outs and loose slips recovered from the guest house with the figures in the statutory records maintained by the appellant company - demand also based on electricity consumption - request of adjournment and cross-examination was denied - principles of natural justice - Held that:- The appellant had made request for adjournment on the dates fixed for personal hearing. The copy of such adjournment requests is available at page 240 to 242 of the appeal paper book. In addition we find that the appellant had also requested for cross examination, in their reply to show cause notice. There is no evidence on record to show that such requests were considered by the learned commissioner. Therefore, there appears to be violation of principle of Natural justice in the present case. However, since the matter is old and the relied upon documents are available on record, we proceed to decide the matter in view of submission made by both sides and evidence available on record, instead of remanding the matter back to the Adjudicating Authority. Shortage detected in the stock of finished goods - Held that:- We have gone through the statement recorded by the officers and we find no mention of the method of physical verification. Nor any calculation chart is made part of panchnama. Thus, we agree with the appellant that verification of stock was by eye estimation only. More over there is no dispute to the fact stated by the appellant company in their reply, that the shortage in case of MS Ingots was 3.24 % and that of TMT bars was 1.4 % of the total production. Such difference in quantity is normal in case of eye estimation of the stock - the allegation of clandestine removal on the basis of the so called shortage in stock of final products is un-sustainable and demand in this regard is fit to be set aside. Figures in Computer printout/loose slips - Held that:- There is nothing on record to suggest the manner in which such printouts were taken. There is also nothing on record to suggest fulfillment of the conditions stipulated in section 36 B of the Central Excise Act 1944 in order to treat computer printout as admissible piece of evidence. The fulfillment of the conditions stipulated in Section 36 B (2) of Central Excise Act 1944 is must for taking computer printout as evidence in the Adjudication proceeding - there can be no doubt that computer printout can be taken in evidence only if the parameters stipulated in section 35 B (2) of the Central Excise Act 1944 are fulfilled. In the present case, we are unable to find any evidence on record to show that the parameters have been fulfilled. In addition there is no corroborative evidence to prove correctness of the data/figure in the computer printout - it is not proper to take computer printout in evidence in the present case for holding appellant company guilty of suppression of production and clandestine removal of goods. Production calculated on the basis of electricity consumption - Held that:- The issue of calculation of average production on the basis of electricity consumption and demand of duty on the production figure arrived at on the basis of electricity consumption had been subject matter of litigation for a long period of time - As a matter of fact, the demand in this case is also based on theoretical calculation taking into account the unauthenticated and uncorroborated figures of production as actual production. Once the allegation of suppression of production and clandestine removal of alleged unaccounted production is proved to be incorrect, the production calculated on the basis of such production figure must be treated as in correct and wrong. Under the circumstances demand of duty on the basis of average production calculated as per consumption of electricity is unsustainable. Thus, the impugned order is vitiated for not allowing cross examination of the witness of Revenue, as required u/s 9D of the Act - In the present case, there is no reliable evidence to corroborate alleged clandestine manufacture and clearance. There is no evidence to show procurement of excess raw material, actual removal of unaccounted finished goods, receipt of sale proceeds of such clandestinely removed goods, transportation of excess raw material or of unaccounted goods produced. Therefore, we have no hesitation in holding that the allegation of clandestine removal of excisable goods is not proved in this case - demand is set aside - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1164
  Benefit of N/N. 29/2004-CE and 30/2004-CE, both dated 09/07/2004 - intermediate product Polyester Tops which are captively consumed in the manufacture of final products viz., woollen/ blended fabrics - benefit of N/N. 67/95-CE dated 16/03/1995 - only allegation made in this regard for not extending the benefit of the said Sl.No.10 of the said Notification No.30/2004-CE, is that polyester tow falling under heading 5501 cannot be considered as polyester staple fibre - CENVAT Credit - Rule 6 of CCR - CBEC Circular dated 28.07.2004. Held that:- On going through the notification No 30/2004, it is seen that there is a condition that Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CENVAT Credit Rules, 2002. The appellants submitted that they have reversed the credit before clearance and it was permissible in terms of the clarification issued by CBEC, vide circular No. 795/28/2004-CX., dated 28-7-2004. We find that it was clarified at issue No. 2 that If the manufacturer had not taken any credit on his pre-budget stock of inputs, he can clear the finished products without payment of duty under Notification No. 30/2004-C.E., dated 9-7-2004. The appellants submitted that they have been reversing credit taken at the time of clearance. We also find that as submitted by the appellants this bench has opined that reversal of credit taken and attributable to goods cleared by availing the benefit of the said Notification No. 30/2004, before clearance would satisfy the condition of nan availment of credit as per the Notification. When a further circular dated 1-2-2007 was issued the appellants started following the new procedure. Therefore, we do not find any infirmity in the procedure availed by the appellants and hold that the benefit of the Notification was correctly availed. The issue of eligibility of Notifications No. 29&30/2004 have been discussed at length by the Bombay High Court in the case of Raymond Ltd. [ 2009 (6) TMI 5 - BOMBAY HIGH COURT], where it was held that the term ‘staple fibres’ at Sr. No.10 of Notification No. 30/04 applies to duty paid inputs falling under Heading 55.01 to 55.04 of the CET which are used in the manufacture of Tops (55.06 / 55.07) and the said term is not restricted to the inputs falling under Heading 55.03 / 55.04 only. - the appellant’s contentions are correct and as they have procured duty paid tow, no duty is payable on the final products in view of the judgments cited. Benefit of N/N. 67/95 - Held that:- There is no dispute that the intermediate product “Polyester Top” arising as an intermediate state is completely consumed captively and has not been cleared as such. Even after for the period 01.03.2007, as they have followed the requirement as contended in Rule 6(1) of CCR and also the Circular 01/02/2007 and as such, no credit was taken in respect of goods cleared under 30/2004 - the goods arising at the intermediate stage of manufacture by the appellants are squarely covered by Notification No. 67/95 and fall under the exclusion at No. (vi) as they have discharged the obligation in terms of Rule 6(1) of CCR - benefit of Notification No. 67/95 cannot be denied. The appellants are eligible for the exemption contained in Notification No. 30/2004 and therefore, the impugned order is not maintainable - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1163
  Manufacture - Printing of the forms etc. - case of Revenue is that printing of forms, though were fully exempted from payment of duty in terms of N/N. 10/2013 dated 01.03.2003 till 28.02.2006, but by Finance Bill, 2006 the effective rate @ 8% ad valorem was imposed vide N/N. 10/2006 – CE dated 01.03.2006 - Held that:- The Commissioner (Appeals) has observed that even though the goods were not sold as such, they were sent/transferred to their own other offices, outside the factory. It is further observed that the goods may not necessarily be sold, but at the same time, they can be marketable. There is no material on record that the printed stationary of the appellant is marketable. It is well settled law that Revenue has to discharge the burden of test of marketability of the product - In the present case, as the Revenue failed to discharge the burden of test of marketability, the demand of duty cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1162
  Clandestine removal - demand raised on the ground that investigation and searches were conducted at the factory and office premises of the Appellant concern and one trading firm M/s Sankalp Foils Pvt. Ltd (SFLP) - demand mainly based upon the pen drives seized from the locker whose key was found from ice cream parlour of Shri Manoj Tanna and 11 bundles of loose papers out of which 4 bundles contain the sheets written in gujarati by Shri Ramesh Shah, director of M/s SFL - it is alleged that M/s SFL has acted in contravention of provisions of Central Excise Act as they had received unaccounted raw-materials, suppressed production and clandestinely removed goods against cash sales, issued invoices without actual clearance of goods, availed cenvat credit without actual receipt of goods - cross-examination denied - demand on the ground of under-valuation - imposition of penalty - CENVAT Credit - fake invoices - issuance of invoice without delivery of goods. Held that:- Apart from the ledgers pointed out by the revenue one more ledger i.e “Purchase-godown” ledger was maintained which carried details of sales made by the Appellant. The Appellant has shown from sample entries that the purchases shown in said “Purchase – godown” ledger were of M/s SFPL and is almost same to the sales shown in “Bombay Sales” ledger. It is their contention that the “Purchase-godown” legder shows the receipt of goods from M/s SFL by SFPL and the “Bombay Sales” ledger the sales of said goods by M/s SFPL which makes clear that the “Bombay sales ledger belong to M/s SFPL and not SFL. We find that it has not been disputed that the godown at Vasai was owned by M/s SFPL, hence in such case if any godown purchase is shown the same can be only of M/s SFPL. The officers alongwith such ledgers also found the godown records of M/s SFPL and those bundles numbered as 8 to 11 were in handwriting of Dheeraj Jain, godown keeper of M/s SFPL alongwith duplicate copies of chits founds were on account of dispatch of goods thru borkers. The Appellant has shown the total of value mentioned in “purchase godown” ledger and compared with “Bombay Sales” which shows that the figures of both are of around same value - Some of the brokers viz. Shri Chhail Singh Deora and Gajendra Purohit also stated that SFL has sold SSCR Coils without any invoice on cash basis of which some coils were used by them for circle cutting and some quantities were sold to some other parties in which case they acted as broker and the payment was collected in cash, but they were not able to provide even the single buyer’s name and address who has purchased such goods from them which leads to doubt about the credibility of their statement. The department apart from the papers seized from the locker has not been able to give any independent evidence which can corroborate the charges. Denial of request for cross-examination - Held that:- The Appellant had requested for following the provisions of section 9D and cross examination of the persons whose statements were relied upon. It was more necessary in the circumstances that not a single documents was seized from these brokers to support their statement and it was only the pen drives and loose sheets on the basis of which allegations were made. The brokers who supported the allegation of the show cause notice could not produce a single document to support the allegations of clearance of goods without payment of duty. In such case the denial of cross examination and non following the provisions of section 9D is not correct. The sole evidence which has been relied upon by the department is only pen drive date and statement of brokers which were even self contradictory. Though the statement of directors has also been relied upon by the department, but we found that even in some statements they have stated that the data found in pen drive do not belong to M/s SFL and it belongs to M/s Sankalp. Inspite of fact that some of the statements were recorded in presence of Snehil R shah who is director of M/s Sankalp, but even then he was not questioned about such data. Atleast the officers could have recorded his statement to ascertain the truth. Even if the statements of director are considered inculpatory the same cannot be relied upon in absence of corroboration with material evidence. Also, revenue did not undertake any investigation at the end of M/s SFPL from where the clearance of goods has taken place. When the brokers had stated that the delivery was taken from Vasai Godown which was under the ownership of M/s SFPL, the officers should have made investigation. Thus in such circumstances, the demand on account of clandestine removal cannot be made. The onus to prove clandestine clearances has to be discharged by sufficient cogent, unimpeachable evidence - the charges of clandestine removal on the basis of pen drive data and sheets are not sustainable. Demand on the ground of undervaluation - Held that:- The revenue has relied upon the statement dt. 28.01.2014 of Shri Kartik Shah wherein he stated that the conclusion drawn by the investigating officers seems to be correct. However no evidence has been placed on record. Even the statement dt. 28.01.2014 gets negated by the subsequent statement dt. 08.10.2013 wherein he stated that he is not able to offer explanation as the pen drives do not belong to Appellant and they have never received any differential value over and above the value shown in invoice. This statement was not mentioned in show cause notice and the appellants have annexed copy of the same with the appeal papers. In such case only on the basis of pen drive the charges of undervaluation cannot be sustained - demand on account of undervaluation is not sustainable. CENVAT Credit - fake invoices - it is alleged that M/s SFL has availed credit on the basis of invoice without actual receipt of goods - Held that:- The revenue has not proved the allegation with any evidence as it has to be shown by making investigation at the supplier’s end, statements of suppliers and other corroborative evidences. It has also to be shown as to how the purchase amount paid by the Appellant to the supplier came back to them. None of such evidence are on record - the allegation and the findings of the adjudicating authority is not sustainable. Moreover there is no person who has received the cash from the Appellant. No person from Appellant company has been named as having receipt of cash and place where the cash was received or manner of receiving cash. Thus the allegations on this account are not sustainable. Demand also on the ground that they issued invoices without delivery of goods - Held that:- The Appellant has consigned the goods to their buyers through M/s SFPL. The goods were handed over to the parties/ brokers from Vasai godwn by M/s SFPL and the Appellants had no role to play in such delivery of goods. There is no evidence at the Appellant’s end that they issued any invoice without delivery of goods - the contention of the revenue that the Appellant issued invoice without actual clearance of goods is not sustainable. The demands and penalties imposed against Appellant M/s Shah Foils Ltd. are not sustainable. For the same reason we also hold that the penalty against other appellants is also not sustainable - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1161
  Requirement of Mandatory pre-deposit - appellant have filed the appeal against the dismissal of application for rectification of mistake - Held that:- In the impugned orders have been admitted by the Commissioner (A) and that the appellant have made the mandatory pre-deposit on 5.2.2016 vide challan No.0072 and copy of the letter dated 19.5.2016 along with challan showing pre-deposit was enclosed. But in spite of the mandatory pre-deposit made by the appellant, the Commissioner (A) refrained from restoring the appeals and decided the same on merits. As per Section 35F of the Central Excise Act, the appellant is required to make mandatory pre-deposit @ 7.5% of the duty demanded in the order to entertain their appeals by the Commissioner (A) or by the Tribunal - But, in the present case, the appellants have made the mandatory pre-deposit which was not considered by the Commissioner (A) on the ground that the same was brought to his notice while disposing of the appeals. Since the Commissioner (A) has not decided the issue on merits, therefore, all the appeals are remanded to the Commissioner (A) with a direction to decide the same on merits after complying with the principles of natural justice - appeal allowed by way of remand.

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• 2019 (1) TMI 1160
  CENVAT Credit - fake invoices - credit sought to be denied on the ground that the appellant namely M/s Vardhman Strips Pvt Ltd Unit-II has received only invoices and not the goods as per the investigation conducted by DGCEI in the case of one Sh. Amit Gupta - Held that:- In this case, Sh. Amit Gupta has issued the invoices to M/s Godawari Enterprises and M/s North Star Industries Pvt Ltd, who further issued the invoices to the appellant, but these suppliers in their statements have stated that they have supplied the goods along with invoices. In these circumstances, without investigating the matter along with the transporters, whether they have supplied the goods to the appellant M/s Vardhman Strips Pvt Ltd, the department cannot deny the Cenvat credit. Admittedly, there is no discrepancy was found in the invoices issued to M/s Vardhman Strips Pvt Ltd. In these circumstances, the Cenvat credit cannot be denied without any contrary evidence on record that the goods have not received by M/s Vardhman Strips Pvt Ltd. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1159
  CENVAT Credit - fake invoices - it was alleged that respondents were received only the cevatable invoices without receiving the goods in question - allegation is based on that the statements of certain drivers/transporter - Held that:- The said statements of drivers have been controverted by the respondents by producing various vouchers which certified that the respondents have received the inputs but in specific instances like in the case of truck no. HR-38N-1285 and HR- 38M-2282, the vehicles are stated to refrigerate van - Admittedly, the refrigerated van cannot transport the goods i.e. plastic mould to the respondents; therefore, the said statement of driver is admissible by holding that the Cenvat credit of invoice bearing vehicle no. HR-38N- 1285 and HR-38M-2282 is denied in the case of M/s Novice Polymers and M/s Airvision India Pvt Ltd respectively - CENVAT Credit rightly denied. In the case of vehicle no. RJ14-1G-7077, there is categorical statement of the owner of the vehicle, that vehicle was carrying the goods from Yamuna Nagar to Jaipur through Harsh Roadlines, Yamuna Nagar who has brought GR issued by Harsh Roadlines as an evidence for movement of the vehicle. The said GR has not been controverted by the respondents with any tangible evidence - credit rightly denied. In the case of vehicle no. DL-1M-1360, the vehicle is a dumper which can only be used for lifting debris. The statement of Sh. Jadish Chand has been taken on records, therefore, the statement of Sh. Jagdish Chand, the owner of Vehicle No. DL1M- 1360 is admissible evidence consequently, the invoices bearing vehicle no. DL-1M-1360, the Cenvat credit is not admissible - credit rightly denied. Penalty on M/s DR Polymers under Rule 26 of the Central Excise Rules, 2002 - Held that:- M/s DR Polymers found to be involved for issuing the impugned invoices. However, M/s DR Polymers is a company and having no knowledge or benefit arriving out of the activity - the penalty is not imposable on a juristic person under Rule 26 of the Central Excise Rules, 2002. Therefore, penalty on M/s DR Polymers is not imposable. CENVAT credit rightly denied - penalty set aside - appeal allowed in part.

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• 2019 (1) TMI 1158
  CENVAT Credit - time limitation - Rule 4(1) of CCR, 2004 - it was alleged that CENVAT credit has been availed beyond the statutory period of one year from the date of document which was in contravention of the amended Rule 4(1) of CCR, 2004. Held that:- In the present case, the credit pertains to two Bills of Entry dated 28.05.2013 and 10.06.2013 but the credit was availed in December 2015 - Further, the limitation of one year for availing the CENVAT credit as per Rule 4 of CCR is not applicable in the present case because the invoices pertains to the period prior to the amendment and the amendment has not been made applicable retrospectively. This issue is squarely covered by the decision of Mumbai Tribunal in the case of M/s. Voss Exotech Automotive Pvt. Ltd. Vs. Commr. of C.Ex. Pune-I, [2018 (3) TMI 1048 - CESTAT MUMBAI] wherein it has been held that restrictions on manufacturer to avail credit beyond the period of six months/one year did not apply to invoices issued prior to the dates of notification. Appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1157
  By-product or manufactured item? - fly ash - Department observed that the appellant has not paid Central Excise duty on the fly ash alleging it to be a by-product, cleared during the period from March, 2011 to December 2011 - Held that:- Since beginning the stand of appellant is that fly-ash is not manufactured by them, as it generates as a residue/ waste, during the generation of electricity. For excisability, the goods have to satisfy 2 conditions i.e. of manufacture and marketability. Though fly-ash has admittedly been sold by the appellant, thus, fulfilling one condition of marketability but it does not qualify the definition of manufacture. In terms of Section 2 (f) of Central Excise Act Hon’ble High Court of Madras in the case of Central Board of Excise and Customs, vs. Mettur Power Thermal Station [2017 (1) TMI 222 - MADRAS HIGH COURT] has held that the fly-ash since is formed during the production of electricity by burning pulverized coal fly-ash cannot be said to be manufacture merely because fly-ash was specific or residuary entry in schedule, it cannot be termed as excisable commodity just because, it satisfies the test of marketability. The statute levy excise duty on the goods which are manufactured and have marketability. Fly-ash in the given circumstances is qualifying only one of the conditions i.e. of marketability and is not qualifying the condition of manufacture, it being compulsorily generated during the process of generation of electricity from lignite and the appellant is the manufacturer of lignite. In the given circumstances, fly-ash is not even the by-product. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (1) TMI 1156
  Liability of Interest on suo-moto payment of tax before assessment proceedings treating the payment of tax being the tax payable as per return - Section 70 of the Madhya Pradesh Commercial Tax Act, 1994 - Held that:- The liability of interest arises in the event which find mention in Sub-section (i), (ii) which establishes the fact that the Assessee was aware of his liability to file return and pay tax on taxable items. Since the same was not paid within the prescribed period, subsequent deposit of tax, i.e. after the prescribed period will not, in our considered opinion, absolve the Assessee from payment of interest and consequential penalty irrespective of the fact that assessment proceedings were initiated after such deposit. Thus, the Appellate Board was not justified in holding that no interest is payable on suo-moto payment of tax before assessments proceedings. The Appellate Board committed patent error in construing the payment of tax after the prescribed period as the tax paid within prescribed period.

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• 2019 (1) TMI 1155
  Principles of natural justice - levy of tax - second sale exemption - TNGST Act - no proper discussion made on documents submitted - Held that:- There is absolutely no finding as to how the First Appellate Authority was satisfied that the assessees are second persons and that they are not liable to tax under the provisions of the TNGST Act. Though the assessee claims that they have placed documents before the First Appellate Authority, there is no discussion as to the effect of those documents which are in the form of invoices, etc. Furthermore, the revenue has specifically contended before the Tribunal that M/s.Ravishankar Films Private Limited though being the registered dealer have not paid tax to the Department for the hire charges. Thus, there is no error in the order passed by the Tribunal and no specific question of law arise for consideration in these tax case revisions. Tax case revision dismissed.

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