Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 11, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years - Not permitted - SC
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Section 69B cannot be invoked on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account.
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Registration of trust u/s 12AA - In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by the assessee from HHBHRF was a bogus donation
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Revision u/s 263 - Merely because that the AO did not discuss these details in the assessment order does not mean that he has not applied his mind.
Customs
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Existing system will be used to make immediate payment of refund of IGST on Exports w.e.f. 10th October 2017 till 14th October 2017. The payment through PFMS portal would be started from 16th October 2017
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Classification of Outdoor Point of Sales Terminal (OPOS) - classifiable under CTH 84718000 or under CTH 85371000 - the character of the goods may be examined by practical demonstration
Service Tax
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Department deems these duty free shops in foreign territory - no Service Tax is chargeable at the first instance on rent for rental of Customs Bonded Warehouse (Duty Free Shop), whether it be in the arrival lounge or in the departure lounge.
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The place of provision of services is the place where duty free shop is located, which is admittedly beyond Customs Frontiers - Even in the Integrated Goods And Services Tax Act, 2017,as per Section 13(4) the place of supply of services remains the place where immovable property is located.
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Leasing of license - The licence can be granted even before the manufactory comes into existence. From the above Rules it is apparent that licence by itself is not a immoveable property and therefore leasing of licence cannot be treated as renting of immoveable property service
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Collection of toll - They have not been engaged in the said activity as business. In such case it cannot be said that the Respondents has been providing auxiliary service to any business
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Life Insurance Services - The Traditional golden plan which does not have any risk cover and thus being not liable to tax falls under the category of exempted service at the relevant time.
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Export of services - Since the Indian rupee is received from the recipient of services through their foreign bank, Bank of America, USA, the receipt of Indian rupee shall be treated as convertible foreign exchange.
Case Laws:
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Income Tax
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2017 (10) TMI 424
Allowability of claim of deduction under s.10A - claim not made in Return of income - assessee in its return of income had claimed deduction under s.10B and not 10A - powers vested with Board recognized to be delegated to the Development Commissioner concerned for granting approvals to 100% EOUs for the purposes of s.10B - reopening of assessment - Held that:- We find force in the argument of the assessee that any delay in ratification of the action of the Development Commissioner as per prescribed procedure by the Board appointed under s.14 of Industries (Development and Regulation) Act 1951, will not mar the claim of deduction by the assessee altogether. Once, the pe mission granted by the office of Development Commissioner stands ratified, the ratification would relate back to the date of permission. It is not the case of the AO that other terms and conditions for availing exemption under s.10B of the Act has not been complied with. In the instant case, it appears from the communication letter dated 14/03/2013 that letter of permission dated 25/05/2007 issued in favour of the assessee for registration as 100% EOU under STPI Scheme was stated to be ratified in the first meeting of Inter-Ministerial Standing Committee (IMSC) on 2-6-2008 constituted by Central Government for such purposes. As noted, the ratification subsequently carried out and communicated will operate from the date of letter of permission issued by the Development Commissioner. Therefore, in our considered view, the action of the AO and CIT(A) in denying the claim of deduction under s.10B of the Act requires to be set aside as unsustainable in law. Also, in view of the merits in the claim of deduction under s.10B, we do not consider it necessary to deal with the challenge of the assessee on allegedly wrong assumption of jurisdiction by invoking the section 147 of the Act. Thus, the assessee, in our considered opinion, is rightly eligible for claim of deduction under s.10B of the Act in the facts and circumstances of the case. - Decided against revenue
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2017 (10) TMI 423
Claim of depreciation under Section 80-IA - Whether the eligible income of an undertaking in respect of which deductions available under Section 80-IA has to be reduced by the allowance of depreciation for the year even though the assessee has exercised the option not to claim depreciation under Section 32 in arriving at its income of the undertaking for the purposes of computing the assessee’s income under the head profits and gains of business or profession? - Held that:- As already mentioned that Full Bench of the Bombay High Court answered the reference by holding that depreciation had to be reduced for computing the profits eligible for deduction under Section 80-IA of the Act, as it was a complete code in itself. For arriving at the said conclusion, the Full Bench took note of the relevant provisions of Chapter VI-A, particularly, Section 80A, Section 80AB and Section 80B as well as Section 80-IA of the Act. Contrasting the provisions of Chapter VI-A with Chapter IV, the High Court remarked that whereas Chapter IV contains provision relating to the computation of total income under various heads of income as also the deductions that are allowable under each head, Chapter VI contains provisions relating to the aggregation of income and set off or carry forward of loss. Chapter VI-A of the Act, on the other hand, provides for special deductions that are allowed at such rates that are specified in the respective provisions on the gross total income of the assessee. Keeping in view the aforesaid scheme of these Chapters, the High Court distinguished the judgment of this Court in Mahendra Mills [2000 (3) TMI 3 - SUPREME Court] and held it to be not applicable, when dealing with the cases under Section 80-IA of the Act. Not only Section 80-IA is a code by itself, it contains the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Act is linked to investment. This Court has also made it clear that Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted. - Decided against assessee.
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2017 (10) TMI 422
Addition u/s 69B - unexplained investment - purchase of land unexplained - additions based on agreement - Held that:- Section 69B cannot be invoked on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account. No action is called for in a case of transaction consequential to the transaction mentioned in the agreement seized. There is no evidence of unaccounted investment by the assessee. See Sh. Kulwinder Singh and M/s Harman Builders Pvt. Ltd. [2016 (8) TMI 1282 - ITAT AMRITSAR]
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2017 (10) TMI 421
Charge of Surtax - Deduction of the amount of depreciation differential from the capital - whether Tribunal erroneously held that the judgment of this Court in Zenith Steel Pipes (1976 (7) TMI 9 - BOMBAY High Court) concludes the issue? - Held that:- Mr. Malhotra is right in his contention that merely because a coordinate Bench has distinguished a judgment of this Court in Zenith Steel Pipes (supra), we must not remit the questions back to the Tribunal. Firstly he would submit that the coordinate Bench was sitting at Madras. The Tribunal's coordinate Bench at Madras was bound by the judgment and order of the jurisdictional High Court. The jurisdictional High Court for that Tribunal is not this Court, but High Court of Madras, at Madras. Secondly, in that case, the Tribunal found on facts that the issue of Companies (Profits) Surtax Act, 1964 levying additional tax on the total income of a company in the manner stipulated by the Act, was brought in issue by the assessee. The assessee argued that Surtax is charged over and above the statutory deductions. The First Schedule to the Act contains the rules for computing the chargeable profits and Second Schedule contains rules for computing the capital base of the company. The Tribunal found that in the case before it, these conditions have not been satisfied. In the case before the Tribunal in respect of differential, there is no reserve credited by the board of directors through a conscious overt act, nor is there any crediting of amount to any reserve by a conscious overt act on the part of board of directors. Of course, a large amount has been allowed in the income tax proceedings as and by way of depreciation. But the other two conditions were not satisfied. That is why the Tribunal found that there was no need to reduce the capital base by differential. It is these facts of the matter which enabled the coordinate Bench of the Tribunal at Madras to observe that true it is that in the case of Zenith Steel Pipes (supra) this Court has taken a view which supports the revenue, but the contentions advanced before the Tribunal's coordinate Bench at Madras and considered by it, were not advanced before the Bombay High Court. It is in these circumstances that the coordinate Bench of the Tribunal distinguished it. We do not see how in the abstract and dehors the factual backdrop Mr.Seth can rely upon the view of the coordinate Bench of the Tribunal. As far as the Income Tax Appellate Tribunal, Mumbai Bench is concerned, it was bound by the judgment of this Court in Zenith Steel Pipes (supra) and when it applies with full force to the facts also. In our view, therefore, none of the contentions of Mr. Seth can be accepted. The questions which have been forwarded for our opinion by the Tribunal are answered against the assessee and in favour of revenue
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2017 (10) TMI 420
Addition on seized documents - unexplained cash receipts - addition under house property - survey u/s 133A - Held that:- The burden was on the assessee to disprove the documents which, in our opinion, he has failed to do. The cash receipt dated 24.10.2007 for ₹ 8,75,000/- is duly signed by the executant as well a witness. CIT(A) has also mentioned that while filing rejoinder to the remand report, the assessee had submitted that he had filed a rectification application u/s 154 to the Assessing Officer wherein the assessee had claimed to be only 75% owner of the premises and had also stated that if at all an addition had to be made in his hands on the basis of impounded documents, it should only be to the extent of 75% of ₹ 2,25,000/- i.e. a sum of ₹ 1,68,750/- only. Ld. CIT(A) has given proportionate relief to the assessee on this account by restricting the addition to ₹ 1,68,750/- only. As far as the assessment order for the succeeding assessment year 2009-10 is concerned, it is seen that the income under the head house property has been accepted without any discussion by the Assessing Officer and it is not discernible from the assessment order as to how the income from house property was accepted without any inquiry. - Decided against assessee.
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2017 (10) TMI 419
Maintainability of appeal - TDS u/s 195 - addition u/s 40(a)(i) - revenue neutral exercise - Held that:- What has been accepted by the CBDT, as learned counsel rightly points out, is the principle that when a disallowance results in an enhancement of business profits but such an enhancement is revenue neutral inasmuch as related business profits, in totality, are eligible for deduction under chapter VI, such appeals need not be pursued. The reference to Section 40(a)(ia) is no more than illustrative in nature, and what holds good for disallowance under section 40(a)(ia) applies, in principle, equally to disallowance under section 40(a)(i) as well. In this view of the matter, in terms of the CBDT circular (supra), the appeal filed by the Assessing Officer, on this point, is indeed not maintainable. Non-deduction of tax at source from payments made to the non-residents must be dealt with at a different level, and bearing in mind the need to protect our tax base, we can only point out that lapses with respect to tax withholding obligations from payments made to non-residents is visited with several type of consequences disallowance under section 40(a)(i), recovery under section 201, penalty under section 271C and, in certain situations, even prosecution under section 276B. We, therefore, see no need to even deal with the matter on merits in the context of the present proceedings, even as we take on record learned counsel’s submission that, even on merits, the issue is now covered in favour of the assessee and that the assessee did not have any obligations to deduct tax at source at all. That aspect of the matter is wholly academic. - Appeal dismissed - Decided against the revenue.
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2017 (10) TMI 418
Cancelling the registration granted to the assessee trust u/s 12AA - bogus donations - grounds for cancellation for registration u/s 12AA(3) is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust - Held that:- There is no evidence whatsoever brought on record to show that the cash was paid by the assessee which in turn reached the hands of HHBHRF which was returned in the form of donation to the assessee after retaining the commission. As we have already observed that the answer to question no.22 given by Shri Swapan Ranjan Dasgupta referred to donations given in the financial year 2011-12 as bogus donations. With regard to the donations received/given prior to 31.03.2011 there is no reference to such donations given or received by HHBHRF being in the nature of bogus donations. The assessee had received the donation from HHBHRF on 03.03.2011. It is therefore not possible to place reliance on the statement recorded at the time of survey and come to a conclusion that the assessee has been indulging in money laundering. In answer to question no.23 Shri Swapan Ranjan Dasgupta founder director of HHBHRF has made reference to certain middle men who are engaged in money laundering using HHBHRF as a medium for money laundering. There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by the assessee from HHBHRF was a bogus donation. Cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed. The appeal of the assessee is accordingly allowed.
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2017 (10) TMI 417
Disallowance of Employee’s contribution of PF, ESI and Professional tax - delay in payment - Held that:- We confirm the finding of the Ld. CIT(A) in deleting the above addition of ₹ 6,6896748/– on account of the employees contribution towards provident fund and ESI and professional tax. See CIT Vs. Amil Ltd [2009 (12) TMI 38 - DELHI HIGH COURT] as held assessee can get the benefit if the actual payment is made before the return is filed - Decided in favour of assessee.
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2017 (10) TMI 416
Revision u/s 263 - non speaking order of AO - Held that:- Simply because the order is not a speaking order does not mean that the AO has not applied his mind. Every kind of detail and documents were submitted by the assessee, during the assessment proceedings, before the AO, therefore, it can be safely assumed that the AO has accepted the claim made by the assessee after going through the explanation and materials submitted by the assessee, pursuant to the statutory notices issued by him. So, the AO has discharged the role of investigator by seeking details and queries in respect to the issues raised by the ld. CIT and after going through the replies and documents submitted to substantiate the claim by the assessee, the AO has consciously after applying his mind as an adjudicator has taken a plausible view on the issues which cannot be termed as unsustainable in law. Moreover, the assessee cannot dictate to the AO how to write the assessment order, therefore, it is not a mistake on the part of the assessee, therefore, the assessee should not be harassed. Merely because that the AO did not discuss these details in the assessment order does not mean that he has not applied his mind. Therefore, considering the factual position, we are of the view that the order passed by the AO u/s.143(3) is neither erroneous nor prejudicial to the interest of revenue. Therefore, we quash the order passed by the CIT u/s.263 of the Act. - Decided in favour of assessee.
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Customs
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2017 (10) TMI 415
Valuation - rejection of declared value - contemporaneous import of similar / like goods based on the NIDB data - whether there are sufficient grounds for rejecting the declared value as well as adopting the value indicated in the NIDB data? - Held that: - in several cases the courts have held that NIDB data is to be adopted very cautiously and cannot be adopted in an indiscriminate manner - the goods laid down as comparison from the NIDB data is by way of Bill of Entry No.950716 dated 15.10.07 at Nhava Sheva port has been assessed provisional only and the value adopted by the department based on the said import at Nhava Sheva port cannot be accepted as such, as no evidence put forth by the revenue to prove that both impugned goods are one and the same - appeal dismissed - decided against Revenue.
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2017 (10) TMI 414
Rectification of mistake - Ld. Counsel pointed out that the said reliance was misplaced as the said order of Hon’ble Apex Court the word interest was not with reference to the duty liability - Held that: - the order dt. 4.11.2016 misconstrued the term ‘interest’ appearing in the judgment of Hon’ble Apex Court in the case of Kesoram Rayon [1996 (8) TMI 109 - SUPREME COURT OF INDIA], however The term ‘interest’ in the said decision does not relate to the interest on duty but on the other charges. This is so as when the demand itself has been set aside there cannot be recovery of interest. In view of above, there is an apparent error in the order dt. 4.11.2016 - ROM application allowed.
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2017 (10) TMI 413
Penalties u/s 112 of CA - Violation of import conditions - it is alleged that the records were manipulated to evidence generation of some quantity of ‘nut coke’ which was claimed to have been utilised in the manufacturing process, albeit by mixing with ferrous burden whereas the non-utilisable coke was transferred to the sister establishment - scope and validity of SCN - Held that: - It is an essential pre-requisite for imposition of penalty that offending goods in relation to which the noticees are alleged to have committed some act of omission or commission be held liable to confiscation. Neither does the notice propose confiscation of goods under section 111 of Customs Act, 1962 nor does the impugned order render such a finding. In the absence of such finding on the goods that are alleged to have contravened the provisions of the Customs Act,1962 leading to confiscation under section 111 of Customs Act, 1962, there is no scope for invoking the penal provisions that arises therefrom. The impugned order is incomplete to that extent. It is found from the records that the appellant-assessee was in possession of a valid Quantity-based Advance License which has been noted in the bills of entry, that a utilisation certificate had been issued by the jurisdictional officer and that a discharge certificate has been issued by the competent authority. These point out to coverage of the imports by notification no.51/2000-Cus. There is no allegation of ‘nut coke’ having been sold in the market; it is moot whether the conversion of unutilisable imported coke into utilisable coke, albeit in another location, for use by appellant-assessee would be a contravention of this notification - yet another aspect that the adjudicating authority has not considered. Matter remanded to the adjudicating authority to determine the relevant issues - appeal allowed by way of remand.
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2017 (10) TMI 412
Import of restricted item - Old/Used photocopiers - Department took the view that the impugned goods are restricted for import and required valid license for import, which was not produced by the importer - Held that: - reliance placed in the case of The Commissioner of Customs, Custom House Versus M/s. City Office Equipment and others [2013 (4) TMI 655 - MADRAS HIGH COURT], where it was held that there was no restriction for import of used photocopier machines during the relevant period - the items are not restricted items - the redemption fine reduced to ₹ 2,33,000/- - penalty upheld - decided partly in favor of appellant.
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2017 (10) TMI 411
Mis-declaration of description of goods - import of 100% cotton woven fabrics stock lot - redemption fine - penalty - Held that: - Taking into account that the appellant has incurred huge demurrage charges, due to the time taken for investigation and also to get provisional release, the redemption fine and penalty imposed is excessive - Reducing the redemption fine to ₹ 1,50,000/- and penalty to ₹ 1,00,000/- would serve the ends of justice - decided partly in favor of appellant.
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2017 (10) TMI 410
Violation of import conditions - When the appellant made import of duty-free raw material but such raw materials were meant for use in manufacture of goods of prescribed composition, 7754.96 Kgs of imported raw materials were not used and inferred to have been diverted otherwise - Held that: - It is strange how appellant when obtained advance licence with appropriate endorsement thereon, not disputed that document but ventured to export. At a belated stage when CRCL’s finding is against appellant, it has come out to escape charge blaming DGFT issuing licence. During the course of investigation and interrogation of various persons it had come on record that the appellants / manufacturer had used blended spun yarns of polyester and cotton to manufacture using corresponding quantity of polyester filament yarn as per SION norms, Sr. No. J-32 - Further, it was found that the establishment was not keeping relevant records in the manufacturing unit - appeal dismissed - decided against appellant.
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2017 (10) TMI 409
Classification of imported goods - Thermal Printer - whether classifiable under CTH 84433290 or under CTH 84431990? - Held that: - When the printers connected to an automatic data processing machine or to a network are different by their character and nature from the heading 8443, appellant’s claim that Thermal Printer is covered by 84433290 is reasonable - appeal allowed. Outdoor Point of Sales Terminal (OPOS) - whether the Outdoor Point of Sales Terminal which is a keypad affixed to the fuel dispensing system shall be classifiable under CTH 84718000 as claimed by appellant or shall fall under CTH 85371000 as claimed by Revenue? - Held that: - Perusal of the coverage of CTH 85371000 shows that the machine used as above as described by the learned Counsel does not appear to be a voltage controller not exceeding 1000 volt - Revenue’s plea as above on OPOS does not appear to be well founded. Therefore the character of the goods may be examined by practical demonstration before learned adjudicating authority to classify the goods appropriately - appeal is partly remanded to learned adjudicating authority for re-determination of the classification of the OPOS - matter on remand. Appeal allowed in part and part matter on remand.
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Service Tax
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2017 (10) TMI 408
Classification of services - Clearing and forwarding agent service - Held that: - the identical matter has been decided by the Hon’ble Apex Court in the case of Coal Handlers Pvt. Ltd. Vs. Commissioner of Service Tax [2015 (5) TMI 249 - SUPREME COURT], where the Hon’ble Apex Court has held that such activities do not qualify under the category of clearing and forwarding agent service - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 407
Works contract service - valuation - inclusion of material supplied free of cost by the service provider in assessable value - the eligibility of the abatement N/N. 15/04-ST where under 67% abatement from the value of construction service provided - Held that: - From the Explanation clause (a) (1) which can be seen that for the purpose of value of goods used in or in relation to the excecution of the works contract value of all the supplies which for a consideration or otherwise should be added. Therefore it is clear that whether the goods used by the service provider or otherwise supplied by the service recipient free of cost, value of all the goods should be included to arrive at the gross value of works contract - the value of free supply material also be added in the gross value of works contract, therefore the demand is sustainable on merit. Extended period of limitation - penalty u/s 78 - Held that: - the appellant having knowledge about the inclusion of free supply material did not include the same and also suppressed the said fact from the department. It is also observed that they did not disclose the value of the free supply material in their ST-3 returns. This is not the case where the issue was under litigation or there is any interpretation of law involved - demand of extended period is sustainable - for the same reason the penalty imposed under Section 78 upheld. Appeal dismissed - decided against appellant.
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2017 (10) TMI 406
Manpower Recruitment Supply Agency Services - deputation of the staff of the appellant under which the appellants staff are deputed for carrying out various work to their group/associate companies - Held that: - reliance placed on the Judgment of Hon’ble Gujarat High Court in the case of Commissioner of Service Tax Vs. Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT], where it was held that the deputation of employee of the appellant to their group companies will not amount to providing services - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 405
Refund/Rebate claim - POPOS Rules - Service Tax paid on the rent paid by the Respondent to the Airport Authorities, for running their duty free shops situated in the departure lounge of various airports - N/N. 41/2012-ST dated 29.06.2012 - Held that: - The Department heavily relies on Article 286 of the Constitution of India and the judgment in Hotel Ashoka vs Asstt. Commissioner of Commercial Taxes, [2012 (2) TMI 62 - Supreme Court of India], which was also rendered in the case of similar duty free shops, where it was held that the Duty Free Shop which is Customs Bonded Warehouse is considered by the Department as a space outside India. Clause (5) of the Place of Provision of Services Rules, 2012 notified by N/N. 28/2012-S.T., dated 20-6-2012, w.e.f. 1st July, 2012, leaves no doubt that the place of provision of services relating to immovable property in the instant case is the place where the immovable property in this case Customs Bonded warehouse (Duty-Free Shop) is located, which admittedly is beyond customs barriers in non-taxable territory. In the case of rent paid for the space of duty free shops, the place of provision of services is thus the place where duty free shop is located, which is admittedly beyond Customs Frontiers - Even in the Integrated Goods And Services Tax Act, 2017,as per Section 13(4) the place of supply of services remains the place where immovable property is located. There is no dispute that the duty-free shops, whether in arrival or departure lounge, of the International Airports are beyond the customs frontiers. Thus, they are outside the taxable territory and thus in non-taxable territory. The Grounds taken in the Appeal also show that the department deems these duty free shops in foreign territory. Since, the rent is paid for the rental space in arrival or departure lounge area in non-taxable territory, the same therefore is not a taxable service - no Service Tax is chargeable at the first instance on rent for rental of Customs Bonded Warehouse (Duty Free Shop), whether it be in the arrival lounge or in the departure lounge. The levy of Service Tax paid by the Respondent is therefore not authorised by law in view of provisions of Finance Act, 1994 read with Article 286 of the Constitution of India. Eligibility for refund - Held that: - There is no dispute on the fact that it is not possible to carry on the export sales at the Duty Free Shop at the departure terminals, without having a space there, which can only be possible by taking the duty free shops on rent from Airport Authority of India. In view of the above, the renting of airport premises at the departure module has a direct nexus with the export sale being made by the Respondent - the Service Tax is collected without authority of law. Such collection of tax on services which are not taxable services, entitles the Respondent for grant of refund. Unjust enrichment - Held that: - The Commissioner (Appeals) has examined the export invoices issued to the international passengers, which is also countersigned by the Customs Officers. No duty or taxes are charged or recovered in the said export invoice. Hence, no incidence of tax or duty has been passed on to their buyer international passengers. Refund/ Rebate allowed - appeal dismissed - decided against Revenue.
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2017 (10) TMI 404
Benefit of N/N. 1/2006 dt. 1.3.2006 - services where material was included in the provisions of service - Commercial and Industrial Construction Service - Management, Maintenance or Repairs Service - Construction of Complex Service - Held that: - The argument that the services are in the nature of works contract services is a legal argument and can be raised by the appellant even if it was not raised earlier. In his submissions before Tribunal - the Ld. C.A. has brought to our attention pages 315 to 332, 357 & 358, 344, 353, 354 of appeal to show that the said contracts are in the nature of works contracts as the price is inclusive of material and works contract tax has been deducted. In respect of these services service tax from the period prior to introduction of the works contract service cannot be demanded - demand set aside. Valuation - non-inclusion of the material supplied by the service recipient for provision of the in the assessable value - Held that: - In view of the decision of Larger Bench of Tribunal in the case of M/s. Bhayana Builders (P) Ltd. Vs. CST, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)], the said amount cannot be included in the assessable value for the purpose of payment of duty - The value of free supply material cannot be included in the value for the purpose of charging service tax - demand set aside. In respect of Multipurpose Hall of Municipal Council Umred and Multipurpose Hall and Library Building Construction for PWD, Nagpur, the appellant have contended before the Commissioner that the said construction is not of commercial nature - Held that: - It is seen that in this regard the order of Commissioner is not a speaking order as it gives no finding in respect of Multipurpose Hall and Library building constructed for PWD, Nagpur - In view of the clear cut Certificate the same cannot be treated as commercial building attracted service tax in the category of commercial and industrial construction. The certificate issued from the office of Municipal Corporation, Umred dt. 30.4.2012 also certifies that it is used for public utility and no revenue generated from the same. In view of this certificate, it is apparent that no tax under the category of commercial and industrial construction can be demanded in respect of these structures - demand set aside. Management, Maintenance or Repairs for goods, equipments or properties service - demand of service tax - Held that: - On perusal of contracts it is seen that the services provided by the appellant are in the nature of repair services. There is no exclusion from the levy of service tax under management, maintenance or repair service for such services given to non commercial structures thus these services would be rightly classifiable and taxable under management, maintenance or repair services. However it is seen that vide Notification No. 54/2010-ST dt. 21.12.2010 full exemption has been provided in respect of management, maintenance or repairs of roads, tunnels, bridges etc - no duty can be demanded in respect of repairs made to bridges - demand set aside. Construction of complex service - Construction of artificial testing track at Dy. RTO Office premises at Chandrapur - appellants had contended that the testing track is nothing but a road the Commissioner has held that the said track cannot be considered as road - Held that: - it is apparent that the said services cannot be charged to service tax under the category of construction and complex service as the service recipient has engaged the appellants for construction of properties for the use of their employees and not for any other purpose - demand set aside. Extended period of limitation - penalty - Held that: - the appellants are a large company and are expected to be fully aware of the laws commercial and industrial construction service, management, maintenance and repair services. They cannot plead ignorance for failure to file return and to pay service ta - extended period and penalty rightly invoked. Appeal allowed in part - For the quantification of duty and redetermination of penalty under Section 78 the matter is remanded to the original adjudicating authority.
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2017 (10) TMI 403
Renting of Immovable Property Service - leasing of license - Section 73 (1) of the Finance Act, 1994 - Held that: - it is apparent that though licence is granted in respect of manufactory but the same is granted to the person. The licence given to a person in respect of a manufactory can be transferred to another manufactory on another site in the name of same person in terms of Rule 4-D & 16-4 of the said Rules. In view of above, it is apparent that while the licence is granted in respect of the manufactory it is not granted to the manufactory but to the person. In these circumstances, it is possible for a person to give on lease the licence while keeping the manufactory in his control. The licence can be granted even before the manufactory comes into existence. From the above Rules it is apparent that licence by itself is not a immoveable property and therefore leasing of licence cannot be treated as renting of immoveable property service - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 402
Repairs and Maintenance Service - recovery of service tax - Proviso to Section 73(1) of Finance Act 1994 - Section 97 of Finance Act, 1994 - supply of tangible goods service - goods transport agency service - site formation service - Construction of APMC market - construction of sports complex/stadium - Held that: - From reading of Section 97, it is clear that as per subsection (1) of Section 97, repair and maintenance of roads was not be levied with Service tax for the period 16-6-2005 to 26-7-2009 both days inclusive. As per this provisions, service tax under Repair and maintenance of roads is not payable for the aforesaid period therefore demand in respect of repair and maintenance of road for the period 16-6-2005 to 26-7-2009 is set aside and if any demand arises other than this period the same stand upheld - demand set aside. As regard the demand of ₹ 7,51,569/- on Supply of Tangible Goods Service, ₹ 9,92,218 in respect of Goods Transport Service, ₹ 1,54,249/- on Manpower Recruitment Service and 20,00,096/- on Site Formation Service provide to Reliance Infrastruture, Butibori, as per the submission of the appellant they have admitted the demand and they do not contest the same therefore confirmation of demand also stand upheld - demand upheld. Construction of APMC market - Held that: - the vital submission was not considered by the adjudicating authority, therefore matter related to this demand is remanded to the adjudicating authority for passing a fresh order - matter on remand. Construction of sports complex/stadium - Held that: - construction of sports complex/stadium is not for commercial activity therefore such activity does not fall under the definition of Commercial and Industrial Construction service - demand set aside. Site formation service - appellant have provided services to M/s. Indu Project - case of appellant is that they are sub contractor and main contractor has paid service tax therefore they are not liable to pay service tax - Held that: - in the Finance Act, 1994 there is no special treatment given to sub contractor or there is any exemption to sub contractor. Every person provides service is an independent service provider, his service cannot be forwarded by service recipient to subsequent service recipient that will not absolve appellant as sub contractor from service tax liability. There is clear relation of service provider and service recipient between appellant and M/s. Indu Project, for such service consideration received by the appellant, therefore they are liable to pay service tax - The appellant admittedly not declared any details about service tax liability on the construction service they have provided to the M/s. Indu Project, therefore there is clear suppression of facts. Accordingly, the service tax of ₹ 44,43,824/- is payable by the appellant, therefore this demand is upheld, interest and penalties imposed by the lower authority will be commensurate to the demand of service tax upheld - demand upheld. Decided partly in favor of appellant.
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2017 (10) TMI 401
Classification of services - collection of toll - Business Auxiliary Services or not? - Held that: - the Respondents has secured the right to toll collection in auction. The Respondents being the suitable bidder were given right to collect the toll and under the terms and conditions of such auction the Respondents were liable to pay the bid amount to NHAI/ MSRDC. Such bid price which the Respondents were liable to pay to the NHAI/ MSRDC was in no way connected with the collection of toll or quantum of toll amount. The Respondents had to pay NHAI/ MSRDC the bid amount irrespective of the fact whether such activity would earn him profit or loss. The NHAI/ MSRDC were in no way concerned with the collection made by the Respondents. As a result of same we find that though in case of Respondent M/s MEP income from toll collection was in negative during the year 2007 - 08, 2008 09 and 2011 12 but they had to pay the bid amount to NHAI/ MSRDC. This leaves no doubt, that the activity of toll collection by the Respondents was not on behalf of NHAI/ MSRDC but on their own account once they had secured the right to collect the toll. The activity of NHAI/ MSRDC is of developing, maintaining and management of national state highways which is a statutory function. They have not been engaged in the said activity as business. In such case it cannot be said that the Respondents has been providing auxiliary service to any business. NHAI/MSRDC is engaged in sovereign function and not into any business activity. It has been held in catena of judgments of Tribunal that NHAI/MSRDC is not into business activity. For this reason the Respondents cannot be said to be engaged in rendering business auxiliary services to any person. Commission Income - Held that: - The Respondent's case is not even concerned with charging commission from NHAL or MSRDC - The toll collection is not being done on commission basis or in lieu of any remuneration. All the proceeds of the toll collection belong to the Respondents with no interference or right of NHAI/ MSRDC. The income so generated is their own business income and NHAI/ MSRDC has no right over such toll collection. The toll is not collected by the Respondents as representative or agent of NHAI/ MSRDC nor any commission in terms of quantum of amount or percentage is charged by the Respondents from NHAI/ MSRDC. They are liable only to pay the bid amount installment to NHAI/ MSRDC irrespective of any collection which can in no way be said to be commission income. The toll collection is their own income and is not parted with NHAI/ MSRDC as they are concerned only with the bid amount finalized in auction and therefore cannot be termed as activity of Business Auxiliary Service - the activity of the Respondent cannot be considered as Business Auxiliary Service and cannot be taxed to service tax. Time limitation - Held that: - the demands are time barred as the show cause notices for the later period were issued earlier which clearly shows that the revenue was in knowledge of the facts - the demands are not sustainable on being time barred. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 400
CENVAT credit - Life Insurance Services - The revenue's case is that the Appellant was not entitled for the credit of services which has been exclusively used in providing the Life Insurance services under the Traditional Golden Plan which is not taxable simultaneously they have availed credit of common input service used in taxable policies as well as policies which had no risk portion and hence not liable to tax - Held that: - in terms of explanation to Rule 2 (e) of CCR, 2004 the services on which no service tax is payable is to be considered as exempted service and the credit of input or input services is not available to the service provider. The Traditional golden plan which does not have any risk cover and thus being not liable to tax falls under the category of exempted service at the relevant time. The Appellant though litigating the show cause notice and demand on merits had also prayed for reversal of credit instead of demand of 6% value of the exempted goods contending that the substantial benefit of reversing the credit should not be denied to them - it is their submission that they have been given option to reverse the proportionate credit and they cannot be forced to reverse 6% of the value of exempted goods in terms of Rule 6 (3) of CCR, 2004 - Held that: - the assessee cannot be forced to pay 6% of the value of exempted goods in case where they have availed the credit of input services used in exempted output services. The Rule 6(3A) of CCR, 2004 only contemplates procedure for application of Rule 6(3) and does not mandates that on failure to intimate in writing for availing option the manufacturer or the service provider shall lose their choice to avail option under Rule 6(3)(ii) for reversing proportionate credit. The procedure given therein and the conditions in said Rule 6(3A) is intended to make Rule 6(3) workable. It nowhere mandates to take away options exercisable available to the assessee. Rule 6(3)(i) cannot be made automatically applicable on failure to intimate in writing about option to be availed by the assessee. The assessee has the option either to reverse the proportionate credit pertaining to such exempted service or to pay 6% - It has been consistently held by this Tribunal that there is no bar on the assessee for reversal of credit said to have been accrued while providing exempted services. It is not disputed that the Appellant is engaged in providing both categories of services and therefore there is no reason to demand cenvat reversal in respect of credit of Insurance Auxiliary services. However, input services which are exclusively used for providing exempted service the cenvat credit on such services is not admissible in terms of Rule 6(5) of Cenvat Credit Rules, 2004. Time limitation - the Appellant has argued that the demand raised by invoking extended period of limitation cannot be made against them as there was no intention to evade the service tax or fraudulent availment of credit - Held that: - apart from the non declaration of exempted service or the credit pertaining to input services used therein, no other facts has been brought to the fore which can show that behind such alleged non declaration or availment of Cenvat Credit there was an intention to evade. The facts of such credit availment were recorded in books of accounts and the same was also presented before audit. There is no findings during investigation that the Appellant was intentionally availing cenvat credit with malafide intention - The issue involved is of interpretation wherein the department is of the view that the Appellant is not eligible for credit and they were liable to maintain separate accounts in order to avail credit when input services were common or non entitlement when the services were exclusively used in exempted service. Whereas, the appellant were under the belief that the activities not being exempted, the credit is eligible. On such ground also there is nothing to establish suppression or willful misstatement with intention to evade payment of duty on the part of appellants - extended period cannot be invoked and demand is clearly time barred. Penalty - Held that: - since, there is no suppression of fact or intention to avail any illegal credit, penalty is set aside. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 399
Refund of unutilized CENVAT credit - Rule 5 of CCR, 2004 read with N/N. 27/2012-CE dated 18.6.2012 - denial on the ground that the export proceeds were realized in the Indian rupees and not in convertible foreign exchange - Held that: - this issue has been considered by various Benches of the Tribunal and it has been consistently held that merely because payment is received in Indian rupee, it cannot be said that payment against export has not been received in convertible foreign exchange as provided in Export of Service Rules, 2005. Since the Indian rupee is received from the recipient of services through their foreign bank, Bank of America, USA, the receipt of Indian rupee shall be treated as convertible foreign exchange. Further, it is also clearly certified in the FIRC issued by the Bank of America, USA that remittances are in convertible foreign exchange. Reliance placed in the case of Sun-Areas Real Estate Pvt. Ltd. [2015 (5) TMI 885 - CESTAT MUMBAI], where it has been held that even though the appellant received the payment in Indian rupees but in view of the FEMA Notifications issued by the RBI, the same is deemed to be in convertible foreign exchange and accordingly the condition as provided u/r 3(2) of Export of Service Rules, 2005 stands complied. The payment received in Indian rupee for which FIRC issued by the Standard Chartered Bank and the payment is routed through foreign bank, shall fulfill the condition of payment (convertible foreign exchange) and therefore, the denial of refund on this ground is not sustainable - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (10) TMI 398
Extension of permission under Rule 16B of the Central Excise Rules, 2002 - clearance of forged black wheels and axles for machining to various job-workers - Held that: - Rule 16B of the Central Excise Rules, 2002, had given power to the Commissioner to pass special order for removal of the semi-finished goods - It is seen that the appellant misused the permission granted by the Commissioner in earlier occasion and therefore, certain conditions were imposed in the impugned order. The appellant had not disputed the allegations as mentioned in the SCN - the appellant may approach to the Commissioner for modification of the order on the basis of the subsequent development in respect of compliance of the order issued under Rule 16B of the CER, 2002 - appeal disposed off.
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2017 (10) TMI 397
Refund claim - Cement cleared to industrial or institutional consumers - N/N. 4/2007-CE dated 1.3.2007 - Department was of the view that the respondents are not eligible for the concessional duty and therefore are not entitled for refund of any amount - Held that: - the cement was cleared by the respondents to M/s. Tamilnadu Electricity Board for their own use and not for resale. So also the quantity was not more than 50 kilograms. The issue whether such clearance to institutions/ industrial consumers, the benefit of exemption under Sl. No. 1C of N/N. 4/2006-CE would be eligible has been analysed and discussed in the case of Grasim Industries Ltd. [2008 (10) TMI 462 - CESTAT, CHENNAI], where it was held that such goods would be covered under Sl. No. 1B or 1C of N/N. 4/2006-C.E. by virtue of the Second Proviso to the Explanation to Sl. No. 1C of the Notification as amended - refund allowed - appeal dismissed - decided against Revenue.
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2017 (10) TMI 396
CENVAT credit - duty paying documents - appellant had availed Cenvat Credit on certain documents wherein there was no service tax registration number of the service provider mentioned or where wrong service tax registration number was mentioned - Held that: - the Cenvat Credit documents have an important role and responsibility is cast on the personal availing Cenvat Credit to ensure that the person providing the service really exist and has paid the duty to the exchequer - In the instant case, absence of service tax registration number clearly indicate that service tax has not been paid to the Government. Failure to perform due diligence on the part of the appellant is apparent - the credit of Cenvat Credit on these documents cannot be allowed. Penalty - Held that: - penalty under Rule 15 of the Cenvat Credit Rules equal to the demand of Cenvat Credit has been imposed - the said penalty is harsh - penalty reduced to ₹ 1,50,000/-. Appeal allowed in part.
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2017 (10) TMI 395
Remission of duty - inputs and semi-finished goods lost on account of fire in the premises - time limitation - Held that: - there is no time limit prescribed for filing the claim of remission and therefore, the time period between the fire broke out and the filing of the claim of remission is not very long - the Commissioner (Appeals) have not given any findings with respect to the remission under Rule 23 of the Customs Act and therefore, to that extent the said order is not a speaking order. Also, the Commissioner has come to the conclusion that the fire broke out due to negligence and not un-avoidable accident, without any concrete basis - matter remanded to the original adjudicating authority to decide afresh after going into the final report of the insurance company and after examining the claim of the appellant under Section 23 of the Customs Act - appeal allowed by way of remand.
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2017 (10) TMI 394
Clandestine manufacture and removal - Gutkha Pouches - whether recourse under section 3A is available to the adjudicating authority for the levy of excise duty on the basis of production capacity and whether any notification was available under this Section for gutkha, during the period covered by the appeals? - Held that: - the dispute in the present case pertains to the period 2002-03 to 2004-05. Hence it is evident that the said section was not in the statute books for the period of dispute and no notifications were also issued covering the commodity gutka, for the relevant period. Hence there is no question of raising any demand on the basis of such provisions - neither the show cause notice nor the adjudicating order has referred to in section 3A. Hence it is to be concluded that the duty demand raised and confirmed was not on the basis of Section 3A which was not in the statute books during the period of dispute. The evidences lead us to the inescapable conclusion that the appellants were involved in systematic fabrication of records relating to procurement of raw materials, suppression of the account of the exisable goods manufactured in their statutory records and clearance of the same without payment of duty. Thus there is no doubt on the factum that evasion of excise duty was taking place rampantly. The dispute appears to be in the quantification of such duty evaded resulting in the demand to be confirmed Scope of SCN - Whether the adjudicating authority or the Tribunal in the earlier round of litigation, has confirmed the demand of excise duty going beyond the reasons appended in the SCN? - Held that: - the show cause notice / SoF is silent on how the duty demand was to be increased from above ₹ 2.82 crores to ₹ 4.29 crores. No work sheet has been attached to show cause notice to indicate for which period the production norms has been adopted and for which period other evidence have been used to determine the duty liability. - the demand raised in Show cause notice is beyond the reasons given in SOF. It is settled position of law that before confirming the demand of Central Excise duty, the assessee is required to be put to notice not only on the extent of duty demand but also evidence on which such duty demands are proposed. As discussed above, we are of the view that the show cause notice has demanded the duty amounting to about ₹ 4.29 crores but have outlined reasons for such demand only to the extent of about ₹ 2.84 crore. Hence, we are of the view that duty demand raised beyond ₹ 2.84 crore has been made without outlining the reasons for such demand and accordingly cannot be sustained. Extended period of limitation - Held that: - the demand of duty by show-cause notice dated 31.1.2007 is also based on evaluation of evidence relating to procurement of unaccounted raw materials/packing materials etc., suppression of production and admitted case of clandestine removal. Therefore, to say that the SCN dated 31.1.2007 relied upon the same evidence as the SCN dated 20.6.2005 is incorrect. Therefore, extended period of limitation has been rightly invoked. Further, the period of 5 years in terms of proviso to Section 11A is invokable from the relevant date and the relevant date is not dependent upon the knowledge acquired by the department but with reference to the obligation of the assessee - extended period rightly invoked. Penalty u/s 11AC and u/r 25 - Held that: - TAG has indulged in manipulation of records relating to procurement of raw materials; they procured unaccounted raw materials; they admittedly entered abysmally low quantity of the production and cleared the same without preparing invoices and payment of duty. Under these circumstances imposition of penalty under Section 11AC is fully justified. However, having imposed penalty under section 11AC, separate penalty under Rule 25 is neither justified nor warranted and the same is liable to be set aside. Penalty on Director - Held that: - His statements reveal his knowledge of manipulation with intention to evade payment of duty. Therefore penalty on him is justified. M/s Embee Agencies and M/s Wahab Stores have knowingly involved themselves in dealing with excisable goods liable for confiscation and therefore penalty on them are also justified. Further, the penalties imposed on them are only nominal and calls for no interference. Appeal allowed in part.
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2017 (10) TMI 393
SSI Exemption - extended period of limitation - Section 11D of CEA - the appellant referred to earlier proceedings - Held that: - On perusal of such proceedings as available in the order dated 3.12.1999, it is found that the said proceedings are with reference to issue of brand name used by the appellant. The present is with reference to the issue of eligibility of the appellant to SSI exemption and the period is also different - the present proceedings cannot be considered as consequence of the earlier investigations which resulted in different proceedings - extended period rightly invoked. Penalty u/s 11AC - invocation of section 11D - Held that: - The fact that such duty has been collected and retained by the appellant will necessarily attract Section 11D also. The lower authorities invoking such provisions of Section 11D for already collected tax but not deposited to the Government by itself will not mitigate the demand under Section 11A which is legally sustainable. In fact, the amount which was collected in excess of due amount liable to the Government, but collected in the name of excise duty shall also be deposited under Section 11D. Interest - Held that: - interest in terms of Section 11AB should be attributable only to Central Excise duty not paid in time by the appellant, however, the said interest will arise only after the introduction of provisions of Section 11AB from 28.9.1996 as affirmed by the impugned order. Appeal dismissed - decided against appellant.
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CST, VAT & Sales Tax
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2017 (10) TMI 392
Detention of imported goods - import of surgical and other allied equipments - the goods imported by the petitioner from Germany on 18.04.2017, was sought to be detained and one time tax has been demanded and compounding fee being two times of the one time tax has also been demanded - Held that: - The import effected by the petitioner has not been disputed by the second respondent, rather admitted as the petitioner has a valid import licence. In such circumstances, the only fact that has to be ascertained is whether the suspicion in the minds of the second respondent that the goods are meant for sale within the State of Tamil Nadu is correct or not. For this purpose, this Court directed the Joint Commissioner (CT), Enforcement, Coimbatore, to submit a report. Upon due verification, a report has been submitted, which clearly states that the imported equipment is used by the petitioner in their hospital. This goes to show that the import has been effected by the petitioner using the import licence granted in their favour and the goods are put to use in their hospital. Thus, there is no grounds to treat the transaction as a sale within the State of Tamil Nadu - petition allowed - decided in favor of petitioner.
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2017 (10) TMI 391
Validity of assessment order - reversal of input tax credit - demand on the ground that details with regard to opening stock, purchase, sales, Branch Transfer and closing stock separately for local purchase, import purchases and interstate purchases are not furnished - Held that: - there is no specific denial by the respondent with regard to the averments made by the petitioner that all split-up details, as sought for were furnished to the respondent. This Court is at a loss to understand as to how the assessee would be benefited by not fully disclosing the figures, when his case is that substantial portion of transactions had been disclosed - this Court is of the view that one more opportunity should be granted to the petitioner to go before the Assessing Officer to establish all their transactions - writ petition is disposed of, by directing the petitioner to treat the impugned proceedings as a Show Cause Notice and submit relevant documents.
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