Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 6, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
GST - States
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22/2018-State Tax (Rate) - dated
6-8-2018
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Arunachal Pradesh SGST
Amendment in the Notification of the Government of Arunachal Pradesh, Department of Tax and Excise, No. 8/2017 - State Tax (Rate), dated the 28th June, 2017,
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21/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Exempts the intrastate supplies of handicraft goods.
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20/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax and Excise, No. 5/2017-State Tax (Rate), dated the 28th June, 2017.
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18/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax & Excise, No.1/2017-State Tax (Rate), dated the 28th June, 2017.
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17/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Purpose of clarifying the scope and applicability of the notification of the Government of Arunachal Pradesh, Department of Tax & Excise No.11/2017- State Tax (Rate), dated the 28th June, 2017.
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16/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax & Excise, No.14/2017- State Tax (Rate), dated the 28th June, 2017.
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15/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax & Excise, No.13/2017- State Tax (Rate), dated the 28th June, 2017.
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14/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax & Excise, No.12/2017- State Tax (Rate), dated the 28th June, 2017.
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13/2018-State Tax (Rate) - dated
26-7-2018
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Arunachal Pradesh SGST
Amendments in the Notification of the Government of Arunachal Pradesh, Department of Tax & Excise No.11/2017- State Tax (Rate), dated the 28thJune, 2017.
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FTX.56/2017/Pt-III/148 - dated
24-9-2018
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Assam SGST
Corrigendum to FTX.56/2017/Pt-III/76 dtd.21/02/2018 (Notification No.6/2018)
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FTX.56/2017/Pt-III/146-21/2018 - dated
24-9-2018
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Assam SGST
Seeks to prescribe concessional SGST rate on specified handicraft items, to give effect to the recommendations of the GST Council in it's 28th meeting held on 21.07.2018
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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The claims of carry forward of the existing duties and credits during the period of migration, therefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give rise to multiple largescale claims trickling in for years together, after the new tax structure is put in place - there is no substance in the petitioners’ challenge to rule 117 (1) of the CGST Rules as well as GGST Rules.
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Classification of Supply - AMC contract - The said contract merits to be considered to be a composite supply of service, and principal supply is service inasmuch as the supply of goods is merely incidental to the maintenance contract in the given facts and circumstances - The supply is considered to be supply of services.
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Sealing of Business Premises - petitioner’s grievance is that the sealing of its business premises on behalf of the Delhi Goods and Services Tax (DGST), ostensibly under Section 67 of the Central Goods and Services Tax Act, 2017, is illegal - Revenue directed to release the premises forthwith.
Income Tax
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Deemed dividend u/s 2(22)(e) - assessee was holding more than 10% shareholding in M/s MLPL (the lender company) and also having a substantial interest in M/s OFPL (the borrowing company) - ITAT divided the deemed dividend proportionally - order of ITAT confirmed.
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Validity of order u/s 264 - against an order made u/s 264, no further statutory appellate remedy is available to the aggrieved party. Therefore, it leads to an irrebutable conclusion that, under such circumstances, a remedy under Article 226 of the Constitution of India is always available to the aggrieved party.
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Levy of penalty u/s 271(1)(c) - claiming false depreciation - lease transaction not to be a bonafide transaction - three authorities have concurrently held on facts against the assessee - Levy of penalty confirmed.
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Deemed dividend addition u/s 2(22)(e) - loan transaction from one subsidiary to another subsidiary company with common parent company - It is not possible to accept the contention that the respondent-assessee should be treated as a shareholder or beneficial owner of the shares in the other subsidiary company.
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Interest u/s 244A for the month of payment of tax or granting of refund has not been provided to the assessee as against specific provisions for the same in Rule 119A - AO is directed to consider the same in the light of Rule 119A
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Short term capital loss - if any, loss have been suffered by the assessee-company, A.O. cannot treat the same as non-genuine due to extraneous considerations or irrelevant reasons in the assessment order.
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Disallowance of losses claimed on account of slow moving stocks - valuation - merely for the reason that few parties did not appear before the AO, there is no reason to suspect total transactions made by the assessee in respect of slow moving stocks.
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Once, the machinery was available for use, though not actually used, falls within the expression used “for the purpose of business of the assessee” and claim the benefit of depreciation.
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Disallowance of provisions for warrantee - if a business liability has arisen in an accounting year, the deduction should be allowed although the liability may have to be quantified and discharged on a future date
Customs
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Claim of damage for loss of job and mental disturbance due to Customs Investigation Proceedings - Company secretary being CFO - Validity of statement made in quasi-judicial proceedings by the MD of the company against the CFO - The statements made in quasi-judicial proceedings before the Customs Authorities cannot be held to be defamation/libel/slander
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Extended period of limitation - Once the appellant has declared what is being imported in the invoice and the Bill of entry, they cannot be faulted for claiming a classification which, according to them is correct.
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Valuation of export goods - While the rejection of the transaction value under Rule 8 by the lower authority is correct, determining the value under Rule 6, ignoring Rule 4 is not correct because this Rule does not require exports to be made by the same exporter or within the same month for the Rule to apply.
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Detention of person under COFEPOSA Act beyond 24 hours - Illegal custody - recording of statement is voluntary or not - notice be issued to the concerned mobile operators, who are directed to preserve the CDRs and tower location of mobile phone of the accused Narender Kumar as well as the officers of DRI as mentioned in the application
Service Tax
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Storage and Warehousing Service - They have only leased out the tanks for a certain period of time for a consideration. This in itself will not constitute warehousing and storage operations, therefore, the demands raised against the appellants on this count are not maintainable
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The appellant is entitled to the refund of excise duty paid by them after adjusting the amount of CENVAT credit under Rule 11 (3) of CCR, 2004 calculated as on the date on which they have claimed the benefit of the exemption.
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VCES rejected on the ground that they had failed to make deposit of 50% of Service Tax amount declared by the due date - even if it is accepted that the error was made while filing the challans in first instance, appellants, should have established their bonafides by filing the challans for remaining amount in correct manner which they failed to do.
VAT
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Penalty - availing ITC - cancellation of seller's registration - It is claimed that the purchase was not aware that the registration of the seller was cancelled - The purchase cannot be held guilty nor he is liable to pay the penalty.
Case Laws:
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GST
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2018 (10) TMI 261
Constitutional Validity of second proviso to Section 140 [1] of the Gujarat Goods and Services Tax Act, 2017 - vires of Rule 117 of the Central Goods and Services Tax Rules, 2017 and Rule 117 of the Gujarat Goods and Service Tax Rules, 2017 - transitional credit - migration to GST Regime - carry forward of CENVAT credit in the electronic credit ledger, available as on 30th June 2017 in terms of Section 140 [3] of the Central Goods and Services Tax Act, 2017 - carry forward of eligible credit of State tax ie., the Value Added Tax available as on 30th June 2017 - time limit to make declaration of available tax credits. Case of the petitioners is that in terms of Rule 117 of the CGST Rules, the petitioners tried to upload the declaration in TRAN1 on the official portal on 27.12.2017, however, due to technical glitches in the portal, the petitioners could not upload the declaration - The petitioners, therefore, approached the concerned authorities on 28.12.2017 and submitted physical declaration in the proper format. The authorities, however, conveyed that they have no power to accept physical declarations. Held that:- It is well settled that the presumption of constitutionality would touch even the subordinate legislation. However, the grounds on which a statute framed by the Parliament or the State legislature are limited, as compared to the subordinate legislation. While a legislation framed by the subordinate legislature can also be questioned on the ground that the same is ultra vires the Act, or is beyond the rule making powers of the authority or that the same is wholly arbitrary and unreasonable, the law framed by the Parliament and the State legislature, could be struck down only on two grounds viz., lack of legislative competence, or violation of the fundamental rights or any other constitutional provisions. It was further observed that no enactment can be struck down by just saying that it is arbitrary or unreasonable. Vires of second proviso to Section 140 [1] of the GGST Act - Held that:- As per the main provision, credit would be available on the amount of Value Added Tax and Entry Tax carried forward in the return. As per the further proviso or the second proviso, such credit to that extent would not be transferred when necessary declarations are not furnished by the dealer. The proviso thereafter however ensures that as and when declarations are filed, the amount equivalent to credit specified in the second schedule would be refunded to the dealer. We do not find any major change in the effect of late production of the forms by a dealer in the present statutory provisions; as compared to the earlier position, nor the statutory provisions deny the benefit of such credit, even where necessary declarations are furnished. Thus, no existing or vested right can be said to have been taken away - We do not think Section 140 [c] is a charging provision or that for want of mechanism for computing such charge, the provision itself would fail. The provision is in the nature of enabling the dealers to take credit of existing taxes paid by them but not utilized for discharging their tax liabilities. It contains conditions subject to which the benefit can be enjoyed. Petitioners’ challenge to rule 117 of the CGST Rules and GGST Rules - As per the petitioners, the prescription of time limit per se is ultra vires the provisions of the Act and the Constitution of India - Held that:- It is in exercise of this rule making power, the Government has framed the CGST Rules, 2017 in which; as noted, subrule (1) of Rule 117 has prescribed, besides other things, the time limit for making declaration in the prescribed form for every dealer entitled to take credit of input tax under Section 140. Subrule [1] of Rule 117 thus applies to all cases of credits which may be claimed by a registered person under section 140 of the Act and is not confined to subsection [3]. This plenary prescription of time limit within which necessary declarations must be made is, in our opinion, neither without authority nor unreasonable. Merely because the rule in question prescribes a time frame for making a declaration, such provision cannot necessarily be held to be directory in nature and must depend on the context of the statutory scheme. In the economic matters of such vast scale, the wider considerations of the State exchequer, while interpreting a statutory provisions cannot be kept out of purview. Quite apart from independently finding that the time limit provisions contained in subrule (1) of Rule 117 of the CGST Rules is not ultra vires the Act or the powers of the rule making authority, interpreting such powers as merely directory would give rise to unending claims of transfer of credit of tax on inputs and such other claims from old to the new regime. Under the new GST laws, the existing tax structure was being replaced by the new set of statutes, through an exercise which was unprecedented in the Indian context. The claims of carry forward of the existing duties and credits during the period of migration, therefore, had to be within the prescribed time. Doing away with the time limit for making declarations could give rise to multiple largescale claims trickling in for years together, after the new tax structure is put in place - there is no substance in the petitioners’ challenge to rule 117 (1) of the CGST Rules as well as GGST Rules. The contention of the counsel for the petitioners that the saving clause inserted in the Gujarat Value Added Tax Act would protect and preserve the tax credits of the past regime, after introduction of the Goods and Service tax is to be noted only for rejection. Petition dismissed - decided against petitioner.
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2018 (10) TMI 257
Classification of Supply - composite or mixed supply? - supply of comprehensive annual maintenance service - principal supply - place of provision of service - service recipient - taxability. Whether supply of comprehensive annual maintenance service which may also involve incidental supply of spare parts/ goods should be classified as a composite supply or mixed supply? In case the said contract is considered as composite supply, what is the principal supply between goods or services? In case goods are considered as principal supply, how the taxability should be determined considering: i. The contract would entail supply of various goods falling under different tax brackets; ii. These goods would be supplied on a need basis as and when required at different point(s) of time and iii. There is no fixed value ascribed for goods in the contract considering these goods would be supplied depending upon condition of the locomotive at the time of maintenance. In case services are considered as principal supply, what tax rate should be applicable? In case of the said contract, what is the relevant place of supply and type of tax which needs to be discharged (i.e. CGST & SGST or IGST)? Held that:- The said contract merits to be considered to be a composite supply of service and principal supply is service inasmuch as the supply of goods is merely incidental to the maintenance contract in the given facts and circumstances - In terms of Section 8 of the CGST Act, 2017 / SGST Act, 2017, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply would be treated as supply of such principal supply. The essential conditions for a supply to qualify as composite supply can be highlighted as: a. Two or more taxable supplies of goods or services or both; b. The taxable supplies should be naturally bundled; c. The taxable supplies should be supplied in conjunction with each other; and d. One taxable supply should be a principal supply - In such case, the supply which is the principal supply is treated as the main supply and the entire transaction should be eligible to GST as per the principal supply. Where the service provider and service recipient of a service are located in India, the provisions of Section 12 of the of IGST Act, 2017 determine the place of supply of services. Sub-section (10) of Sec. 12 ibid enjoins that place of supply if service on-board a train shall be the first scheduled points of departure of the convenience. If the location of the supplier and place of are not in the same State or Union territory, it shall be treated as inter-State supply of Services and IGST shall be levied, otherwise CGST & SGST shall be levied - If the supply of services is not made on-board a train, the location of a registered service recipient shall be the place of supply of service as per Section 12(2) ibid. Ruling:- Since the supply of maintenance service is for a one and fixed price with or without supply of spare parts/goods and supply of service and goods is made in conjunction with each other in the ordinary course as per maintenance contracts, this maintenance service to the extent of presence of all the necessary ingredients cited in the legal provisions quoted supra, is naturally bundled with the incidental supply of goods., it is case of composite supply of service. The said contract merits to be considered to be a composite supply of service, and principal supply is service inasmuch as the supply of goods is merely incidental to the maintenance contract in the given facts and circumstances. The supply is considered to be supply of services. The Service Code for the maintenance and repair service of transport machinery and equipment is 998714 and the prescribed rate of GST is CGST @ 9% of the taxable value, SGST @ 9% of the taxable value or IGST @ 18% of the taxable value. Where the service provider and service recipient of a service are located in India, the provisions of Section 12 of the IGST Act, 2017 determine the place of supply of services - The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.
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2018 (10) TMI 256
Important questions of the constitution of the Goods and Service Tax Appellate Tribunal raised - instead of admitting the petition we would take up hearing of the petition for final disposal at admission stage itself.
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2018 (10) TMI 255
Filing of Trans-I form - migration to gst regime - transitional provisions - transitional credit - Held that:- The Petitioner states that they have received a communication from the Respondent that the issue raised by the Petitioner herein, has been resolved. However, on instructions, Mr. Raichandani, learned Counsel states that while seeking to act in terms of directions received by them from the Respondent, they are facing some difficulties and, therefore, seeks time to resolve this issue with the assistance of the Respondent, before the next date - Petition is adjourned to 8th October, 2018.
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2018 (10) TMI 254
Sealing of Business Premises - petitioner’s grievance is that the sealing of its business premises on behalf of the Delhi Goods and Services Tax (DGST), ostensibly under Section 67 of the Central Goods and Services Tax Act, 2017, is illegal - It is claimed that the authorization does not name the assessee; it only lists the two premises i.e. the business premises at Netaji Subhash Place and the DSIDC Unit at Narela. Held that:- Given the plain text of the statute i.e. especially Section 69(4), which merely authorizes the concerned officials to search the premises and if resistance is offered, break-open the lock or any other almirah, electrical device, box, etc. containing books and documents, the complete sealing of the premises, in the opinion of the court is per se illegal. Even if it were assumed that the respondents temporarily restrained the petitioner from using its premises, for a few hours, till the books of accounts are made available in order to secure the evidence available in the premises, that could not have assumed the life on “its own”, at least indefinitely. In these given circumstances, this petition has to succeed. Since the premises have been in the possession of the respondents for over a month, a direction is issued to remove the seal forthwith – within the next 12 hours and hand over the premises to the petitioner. Petition allowed.
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2018 (10) TMI 253
Unable to upload GST Tran-I declaration - migration to GST - Transitional provisions - transitional Credit - Held that:- The writ petitioner shall submit their application in accordance with the circular dated 03.04.2018 within a period of two weeks from the date of receipt of a copy of this order to the Assessing Officer/Jurisdictional Officer/GST Officer - On receipt of such application, the Assessing Officer/Jurisdictional Officer/GST Officer is directed to forward the application to the Nodal Officer within a period of one week - The Nodal Officer in consultation with the GSTN shall take note of the grievance expressed by the petitioner/Assessee and forward the same to the Grievance Committee, which in turn would take an appropriate decision in the matter as expeditiously as possible, in any event, within a period of six weeks thereafter.
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Income Tax
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2018 (10) TMI 260
Addition in respect of sundry creditor balance u/s 68 - Held that:- Assessee has furnished entire requisite details together with the bills and vouchers and all the supporting documents in support of the claims made in the return of income, which fact has been acknowledged by the ld. AO in his assessment order. We also find that the said supplier Mr. Jaharlal Ghosh in response to notice issued u/s 133(6) of the Act had replied before the ld. AO vide his letter dated 15.11.2013 confirming the fact of supply of materials to the assessee during the financial year 2010-11 and had also confirmed the fact that some amount was receivable from the assessee for such supply of materials. It is factually incorrect on the part of the ld. AO to conclude that the said trade creditor had confirmed Nil balance as on 31.03.2011 as amount receivable from the assessee. Hence it could be safely concluded that the AO had proceeded to make an addition by treating the concerned sundry creditor as bogus based on incorrect assumption of facts - no addition could be made u/s 68 in respect of a trade creditor. AO had not disputed the purchase of materials made by the assessee from the said sundry creditor and hence the corresponding credit entry i.e. credit to the account of the sundry creditor cannot be doubted by the ld. AO. Thus we direct the ld. AO to delete the addition - Decided in favour of assessee.
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2018 (10) TMI 259
Addition u/s 153A - Addition made towards share application money for want of incriminating materials found during the course of search relatable to such issue - Held that:- In respect of abated assessments (i.e. pending proceedings on the date of search), fresh assessments are to be framed by the ld AO u/s 153A which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. In respect of unabated assessments, the legislature had conferred powers on the AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. This would be the correct understanding of the provisions of section 153A as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A would become redundant and would lose its relevance. Hence the arguments advanced by the DR in this regard deserves to be dismissed. The assessment framed u/s 143(1) for the Asst Year 2012-13, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share application money and share premium u/s 68 is hereby directed to be deleted. It is not in dispute that there was absolutely no incriminating material found during the course of search in the instant case with regard to the issue of share capital, share premium and the AO had only tried to explain the various layers through which the monies ultimately reached the assessee company. The other addition of commission of ₹ 35,000/- is only consequential to the first addition. - Decided against revenue
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2018 (10) TMI 258
Reopening of assessment - mere change of opinion - bogus purchase sales transactions - Held that:- The ratio laid down in Claggett Brachi Company Ltd. vs CIT (1989 (4) TMI 2 - SUPREME COURT), in Anusandhan Investment Ltd. vs DCIT [2006 (8) TMI 146 - BOMBAY HIGH COURT] and Piaggio Vehicles Pvt. Ltd. vs DCIT [2007 (2) TMI 173 - BOMBAY HIGH COURT] held that in a case of reopening after four years subsequent to scrutiny assessment, contradiction was recovered by between tax audit report and return of income, it was a case of omissions and/or failure on the part of the assessee to disclose fully and truly all facts for computation of income, therefore, respectfully following the aforesaid decisions and the factual matrix narrated before us, we find no infirmity in the conclusion of CIT(Appeal), therefore, the on the impugned issue of validity of reopening, we uphold the same, resulting in to, dismissal of the ground raised by the assessee. Addition with respect to purchases/sales from six parties - non-compliance to the notice issued u/s. 133(6) - Held that:- In the present appeals, it is noticed that the notices issued under section 133(6) were not complied with and the assessee did not produce the parties before the learned Assessing Officer to prove the genuineness of the transactions. Even the new addresses, if any, of these parties were never supplied by the assessee to the AO so that the noticed could be issued to such parties at the new addresses. The genuineness of the transactions thus, could not be established by the assessee. Therefore, considering the totality of facts, cases relied upon by both sides, discussion made hereinabove, to plug the leakage of revenue, we are of the view that the learned CIT(A) has taken one of the best possible view to estimate the profit @12.5%. Thus, the stand taken by the learned CIT(A) is affirmed.
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2018 (10) TMI 252
Disallowance expenses claimed towards the bricks, machinery repair, cartage etc. and labour expenses - insufficient evidence - Held that:- SLP dismissed.
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2018 (10) TMI 251
Benefit of Section 92B - international transaction granted benefit of Section 92B - LIBOR rate plus 2% on account of interest free loans provided by the appellant - Held that:- SLP dismissed.
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2018 (10) TMI 250
Deemed dividend u/s 2(22)(e) - beneficial shareholder - protective assessment - assessee was holding more than 10% shareholding in M/s MLPL (the lender company) and also having a substantial interest in M/s OFPL (the borrowing company) - ITAT divided the deemed dividend proportionally - Held that:- We find that the reasoning given by the ITAT that there cannot be any proportionate addition of deemed dividend taking into consideration the percentage of the shareholding in the borrowing company, does not give rise to any substantial question of law. In the factual matrix before the ITAT, it held that Section 2(22)(e) does not postulate any such situation. This is especially the case before us as there is only one shareholder that has a shareholding in the lending company as well as in the borrowing company. This being the case and purely factual in nature, we do not think that the ITAT was in any event incorrect in rejecting this argument of the assessee. We may hasten to add that different considerations may arise if two or more shareholders are shareholders of the same lending company and the same borrowing company. In such a factual position it could possibly be argued that the addition ought to be made on a proportionate basis. However, we are not examining this issue in the present case as the facts before us are completely different.
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2018 (10) TMI 249
Extension the due date to file TAR and ITR - Held that:- Taking into consideration the fact that CBDT has already extended the date for filing TARs and ITRs by those assessee whose accounts are not required to be audited for a month without levy of any interest, we deem it appropriate to direct Respondent No. 2, CBDT to consider the representation of the petitioner-Association and take a decision on both the aspects i.e. extension of date by another 15 days and extension of due date for the purpose of Explanation 1 to Section 234A of the Act for waiver of interest and decide the same by passing speaking order preferably before 10.10.2018.
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2018 (10) TMI 248
Vacating the stay already granted - direction to pay 20% of the disputed demand and by granting stay for the rest of the demand till the disposal of the first appeal - Held that:- Considering the fact that the first respondent, while considering the stay petition, at the first instance, has originally granted 100% stay and considering the fact that the petitioner is also ready to co-operate for the disposal of the appeal within the time stipulated by this Court, it is of view that the interest of justice would be met, if this writ petition is disposed of in the following manner: (a) This writ petition is allowed and the impugned order is set aside. Consequently, the first respondent is directed to take up the appeal on 03.10.2018 and dispose of the same on merits and in accordance with law, after giving due opportunity of hearing to the petitioner. (b) The petitioner is directed to appear before the first respondent on the said day i.e. on 03.10.2018, either by himself or through his authorized representative, without fail and co-operate with the first respondent for the disposal of the appeal without seeking adjournment. (c) If the petitioner or his authorized representative fails to appear before the first respondent on the said day for any reason, the order impugned in this writ petition stands restored.
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2018 (10) TMI 247
Revision petition - Validity of order under Section 264 - Assessing Officer to treat the lands in question as non-agricultural in nature and therefore, as capital assets, in the hands of the assessee, exigible to capital gain tax - whether the present writ is maintainable against the order of the first respondent? - Held that:- No doubt, Explanation 1 to Sub Section (7) of Section 264 contemplates that an order by the Principal Commissioner or Commissioner declining to interfere shall, for the purpose of Section 264, be deemed not to be an order prejudicial to the assessee. But that does not mean that even though the Authority under Section 264 rejected the revision, thereby declining to interfere with the order put to challenge in revision, the aggrieved assessee cannot have any further remedy at all against the said order made under Section 264. There is no dispute to the fact that against an order made under Section 264, no further statutory appellate remedy is available to the aggrieved party. Therefore, it leads to an irrebutable conclusion that, under such circumstances, a remedy under Article 226 of the Constitution of India is always available to the aggrieved party to challenge the order made under Section 264. Thus reject the above objection made by the Revenue on the maintainability of the writ petition. It is further contended that the very revision itself was not maintainable before the first respondent and consequently, the order passed by the first respondent cannot be challenged by way of the present writ petition. I have already pointed out that the very issue against the maintainability of the revision before the first respondent, having not been raised by the Revenue before the first respondent, the same cannot be raised now before this Court as first time. Nature of land - whether the lands in question are agricultural or non agricultural lands? - Held that:- he first respondent, first of all, has not discussed the above aspect in detail except extracting the particular clause in his order and thereafter, to decide only by saying that the case of the assessee is rejected. As rightly pointed out by the learned counsel for the petitioner, the character of the property, at the relevant point of time, at the hands of the vendor, alone should be taken into consideration and that the intention of the purchaser as to how he is going to treat the property after such purchase, cannot be a determinative factor to decide such character. Even otherwise, the above clause in the Power of Attorney relied on by the first respondent clearly indicates that the Power of Attorney is going to convert the entire property as house sites. Therefore, it is evident that at the relevant point of time, the character of the lands at the hands of the assessee cannot be construed as house sites, since such conversion was intended to take place in future. Therefore, the first respondent ought to have gone by the other relevant revenue records and supportive confirmation certificates to arrive at a conclusion with regard to the nature of the land. Though the petitioner in this writ petition has contended that the reopening of the assessment under Section 147 was beyond four years without there being any averment that the petitioner had not fully and truly disclosed the material facts, perusal of the revision petition filed under Section 264 dated 25.02.2016 and a written submission filed in the said revision dated 12.09.2016 do not indicate that the petitioner has raised the above contention before the first respondent/revisional authority. The order passed by the first respondent, impugned in this writ petition, also does not deal with such issue. In any event, as this Court has chosen to remit the matter back to the first respondent, it is open to the petitioner to raise such contention as well before the first respondent by way of additional grounds and if any such ground is made - matter is remitted back to the first respondent to reconsider the entire matter afresh.
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2018 (10) TMI 246
Non credit of advance payment of tax - Refund claim - Held that:- From the perusal of the communication of the petitioner dated 20.10.2015 and the certificate issued by the said Bank dated 27.08.2003, it is evident that the claim of the petitioner in making the advance payment of ₹ 25,000/- has not been considered by the Assessing Officer, while making the claim of ₹ 30,609/-, in respect of the assessment year 2002-03. The second respondent is directed to consider the claim of the petitioner in respect of assessment year 2002-03 in making the advance payment of tax of ₹ 25,000/- through his communication dated 20.10.2015 also by considering the certificate issued by the Chennai Central Cooperative Bank Ltd., Mylapore Branch, Chennai, dated 27.08.2003 and pass appropriate orders accordingly on merits
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2018 (10) TMI 245
Levy of penalty u/s 271(1)(c) - claiming false depreciation - lease transaction not to be a bonafide transaction - Held that:- On careful perusal of the documents, it is not in dispute that the assets claimed to have been leased to the said Mafatlal Industries limited, were an integral part of the appellant's factory at Gujarat. The Appellate Authority while confirming the order passed by the Assessing Authority, has held that the machineries being incapable of commercial purchase and sale in the open market, already being an integral part of the factory of the vendor - lessee, and further held that the assessee had earlier also indulged in similar bogus sale and lease back transaction with A.T.V.Projects India Limited, Bombay in 1993 and had subsequently availed of VDIS in 1997, by withdrawing this depreciation. This suggests that the assessees is aware of such mechanism of claiming false depreciation and thus, concealing the income. Assessee could not explain as to why they were not in possession of the original insurance policy and why only copy was obtained from Mumbai. The discrepancy in the date of stamp paper was also pointed out. Thus, in our considered view three authorities have concurrently held on facts against the assessee. While examining the correctness of the order passed by the Tribunal under Section 260A of the Act, we cannot convert ourselves as a third appellate authority over the findings rendered by the Assessing Officer. - Decided against assessee.
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2018 (10) TMI 244
Deemed dividend addition u/s 2(22)(e) - loan transaction from one subsidiary to another subsidiary company with common parent company - deemed shareholder - Held that:- It is an accepted and admitted position that M/s Cargill Global Trading India Private Limited is one step down subsidiary of M/s Cargill Inc USA. The respondent-assessee is a two step down subsidiary of M/s Cargill Ink USA. The step up subsidiary(ies) of M/s Cargill Global Trading India Private Limited and M/s Cargill India Private Limited are different and not common. It is not possible to accept the contention that the respondent-assessee should be treated as a shareholder or beneficial owner of the shares in M/s Cargill Global Trading India Private Limited. We do not think that the loan given by M/s Cargill Global Trading India Private Limited can be treated as “deemed dividend” paid to the respondent-assessee. - Decided in favour of assessee.
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2018 (10) TMI 243
Disallowance of Gate Expenses - allowable busniss expenses u/s 37 - Held that:- As during assessment proceedings, it was noted that the assessee debited a sum under the head catering and gate expenses which were disallowed in earlier years as they were found to be illegal payments in the form of tips paid to certain authorities at the docks and therefore, not allowable in terms of Section 37(1). CIT(A) has confirmed the same, against which the assessee is under appeal before us. Assessee at the outset, fairly conceded that the issue stood covered against the assessee by the order of this Tribunal for several earlier AYs starting from AY 1999-2000. In view of the admitted position, this ground stand dismissed. Disallowance of delayed payment of employee contribution to PF / ESIC - Held that:- We delete the impugned addition as made by Ld. AO subject to verification of the fact that all the payments have been made before due date of filing of return u/s 139(1). The suo-moto disallowance of ₹ 0.24 Lacs as made by the assessee shall remain undisturbed. The Ld. AO is directed to verify the fact that impugned payments were deposited by the assessee before due date of filing of return of income with a direction to assessee to provide requisite details in this regard. The ground stand allowed. Disallowance u/s 14A - Held that:- We find that it is an undisputed fact that no exempt income has been earned by the assessee during the impugned AY and therefore, no disallowance was called for u/s 14A as per catena of judgments of Higher Judicial Authorities in assessee’s favor. Addition of Deposits written-off which mainly comprised-off of forfeiture of security deposits paid by the assessee on account of termination of lease before stipulated lock-in-period - Held that:- The security deposits made by the assessee have been adjusted / forfeited by the landlords on account of the fact that the premises were not used for minimum lock-in-period as stipulated in the respective agreements. It is also undisputed fact that the premises were being used for business purposes. AO, himself, in the alternative, opined that the said expenditure was capital in nature which demonstrates that the genuineness of the same was also not under doubt. Under these circumstances, we find that the expenditure was not capital in nature since the same did not bring into existence any new asset or benefit of enduring in nature. The same, being incurred during the course of business, were revenue in nature and therefore, allowable to the assessee Disallowance of professional fees paid to an individual Raju Shete which was payable in 4 quarterly installments - Held that:- The payment made by the assessee should breach the threshold conditions of Section 37(1) that the expenditure was incurred wholly and exclusively for the business purposes of the assessee before becoming eligible to be claimed as deduction. The stated payments, prima facie, seems to be part of acquisition process only and therefore, it become imperative to find out the exact nature of services being rendered by Shri Raju Shete to the assessee company. Therefore, reversing the stand of Ld. CIT(A), the matter stand remitted back to the file of Ld. AO for re-adjudication in the light of acquisition agreement dated 10/03/2009 as filed before us. The complete onus to demonstrate that the impugned expenditure qualify for deduction as per law rest with the assessee. Also the terms of correspondence dated 10/03/2009 provided for rendering of services for a group of entities which are referred to as Combined Entities and the services are not restricted exclusively to assessee only. All these entities have separate legal existence. Therefore, if the said expenditure is, at all, found admissible, the deduction to the assessee could be allowed only to the extent of services being rendered by the stated individual for the benefit of the assessee only and not for other entities. AO is directed to delve into the same, if found necessary. Transfer Pricing [TP] Adjustment - proportionate adjustment confirmed - assessee had applied entity level TNMM to benchmark the international transactions - Held that:- No infirmity in the stand of Ld. CIT(A) in granting the benefit of proportionate adjustment to the assessee by holding that entity level TNMM could not be applied to all the transactions / cost base on gross basis as a whole and the same was to be applied on proportionate basis to international transactions which were subjected to determination of ALP. Upon perusal of impugned order, we find that FAA while granting proportionate adjustment arrived at TP adjustment of ₹ 25.63 Lacs, being 2.54% of TP adjustment of ₹ 10.49 Crores as computed by Ld. AO. However, the said adjustment has been found to be within range of safe harbor of +5% as provided u/s 92C(2) as calculated with reference to aggregate international transactions of ₹ 11.28 Crores and therefore, deleted in full. No infirmity in the same since the benefit as envisaged by the statutory provisions could not be denied to the assessee. Therefore, the same being in accordance with law, require no interference on our part.
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2018 (10) TMI 242
Interest u/s 244A - refund granted into tax refund and interest refund and adjusted the tax refund from tax refund due and interest refund from interest refund due - CIT(A) ought to have adjudicated the issue even when the rectification petition was pending - Held that:- We find that the issue has already been adjudicated by the Tribunal in assessee’s own case [2016 (8) TMI 688 - ITAT MUMBAI]. Therefore, without delving much deeper into the issue, AO is directed to re-compute the amount refundable to the assessee in terms of the decision of this Tribunal for AY 2008-09 by disposing-off application u/s 154 filed by the assessee. The assessee is directed to file the necessary computations / details in this regard. Needless to add that the assessee shall not be entitle for any interest on interest, whatsoever, in terms of the cited decision of COMMISSIONER OF INCOME TAX, GUJARAT VERSUS GUJARAT FLOURO CHEMICALS [2012 (8) TMI 740 - SUPREME COURT] Interest u/s 244A for the month of payment of tax or granting of refund has not been provided to the assessee as against specific provisions for the same in Rule 119A - AO is directed to consider the same in the light of Rule 119A. This ground for both the years stand allowed for statistical purposes. Not set off correct amount of brought forward losses as finally ascertained consequential to the orders of appellate authorities - Held that:- We find that the assessee has already filed rectification application dated 13/12/2016 against the same. We find the adjustment to be consequential in nature and therefore direct the Ld. AO to consider the same in the light of application u/s 154 filed by the assessee. This ground stand allowed for statistical purposes.
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2018 (10) TMI 241
Short term capital loss disallowed - non-genuine claim - admission of additional evidence - Held that:- The claim of assessee-company is supported by the documents on record. Therefore, Ld. CIT(A) rightly came to the finding that the assessee-company has genuinely entered into purchase and sale of shares and if any, loss have been suffered by the assessee-company, A.O. cannot treat the same as non-genuine due to extraneous considerations or irrelevant reasons in the assessment order. The assessee-company has given scientific reasons for investment in these companies which are supported by documentary evidences. The Revenue has only contended that Ld. CIT(A) has not seen whose shares are sold by the assessee-company. However, complete details of purchase and sales are mentioned in the orders of the authorities below supported by documentary evidences. Therefore, nothing could be attributed against the assessee-company in this regard. Considering the totality of the facts and circumstances of the case in the light of finding of fact recorded by the Ld. CIT(A), we do not find any merit in the Departmental Appeal. - Decided against revenue
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2018 (10) TMI 240
Disallowance on account of electric repair and maintenance expenses - Held that:- Considering the nature of business of assessee, these expenses are incurred on electrical repair and maintenance, which are in nature and consumable expenses. The assessee has rightly treated the same as revenue expenditure. The A.O. has not pointed-out as to which capital have been generated by the assessee for purchasing tube rods, electrical wires etc. In the absence of any specific finding against the assessee, we set aside the Orders of the authorities below and delete the addition. Addition on account of car running and telephone expenses - Held that:- We are of the view that addition is wholly unjustified. The assessee is a domestic company and as such there may not be any personal expenses incurred by the assessee company on account of car running and telephone expenses. It appears to be an adhoc addition made by the A.O. without pointing out any specific inadmissible expenses incurred by the assessee. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. Addition on account of fabrication charges - Held that:- The details of expenses shows that the expenses are essentially incurred on fabrication charges, consumption of indigenous consumable stores, import of components and spare parts and cleaning and forwarding and freight. Thus, for earning income, assessee shall have to incur expenses on fabrication charges. In the absence of any specific defect pointed-out in the maintenance of the books of account, there were no justification for the A.O. to disallow the entire amount of fabrication charges. CIT(A) also verified the details and the books of account and came to the finding that the assessee has maintained proper books of account and that there are no violation of TDS provisions. CIT(A) on proper appreciation of facts and verification of the record and the books of account produced by the assessee, correctly deleted the addition - Addition deleted - Decided against revenue Addition u/s 68 - unexplained cash credit - Held that:- No interference is called for in the matter. The assessee proved the identity of the investor, its creditworthiness and genuineness of the transaction in the matter. Whatever documentary evidences were filed on record, the A.O. did not make any efforts to summon the Investor and no efforts have been made to verify the documents from the Investor. There is no finding that material disclosed was untrustworthy. No evidence has been brought on record, if investment made by the Investor Company actually emanated from the coffers of the assessee company so as to enable the total investments to be treated as undisclosed income of the assessee. - Decided against revenue
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2018 (10) TMI 239
TDS u/s 195 - business connection in India - bearings purchased from foreign companies on which TDS has not been deducted - payments been made to the nonresident which is a foreign company - DTAA provisions - PE in India of the US based company - Held that:- It is clear from the order of the Ld. CIT(A) that he has considered various circulars and case laws and DTAA between USA and India. The assessee is not liable for the deduction of TDS as per section 195 as alleged by the Assessing Officer. Therefore, in view of the above findings of the Ld. CIT(A) the AO was not justified to make addition of ₹ 1,06,53,926/-u/s 40(a)(i) of the Income Tax Act, 1961. - Decided in favour of assessee.
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2018 (10) TMI 238
Validity of assessment under section 153C - No proper satisfaction has been recorded by the AO of the searched person of Shri Gangadhar Shetty or its group cases - Held that:- Satisfaction in the case is not recorded by the AO of the searched party, which is a pre-condition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed u/s 153C read with Section u/s 143(3) of the Act is bad in law and hence, quashed. The jurisdictional issue of the assessee’s cross objection is allowed. Since, we have already adjudicated the jurisdictional issue of assessee’s CO by quashing the Block Assessment; we need not to go into the merits of the case raised in Revenue’s appeal.
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2018 (10) TMI 237
Addition of loss claimed on account of under valuation of sales returns received from various dealers - sales returns claimed by the assessee is not substantiated with necessary evidences - Held that:- The fact remains unchanged. The revenue failed to bring on record any further evidence to controvert the findings of facts recorded by the CIT(A) in the light of remand report furnished by the AO. Therefore, we are of the considered view that there is no error or infirmity in the findings of CIT(A) and hence, we are inclined to uphold findings of the CIT(A) and reject grounds taken by the assessee as well as the revenue. Disallowance of losses claimed on account of slow moving stocks - addition towards loss claimed on slow moving stocks for the reason that there was no mention of outward entry No. on the stamps affixed on the delivery challans - Held that:- CIT(A), after considering relevant facts and also taking into account the remand report deleted addition made by the AO, except to the extent of ₹ 8,42,020 in respect of 3 parties from whom no information has been received. Facts remains unchanged. The revenue failed to bring on any evidence to controvert the findings of fact recorded by the Ld.CIT(A) in the light of remand report issued by the AO. When the parties, who appeared before the AO confirmed the transactions, merely for the reason that few parties did not appear before the AO, there is no reason to suspect total transactions made by the assessee in respect of slow moving stocks. We further notice that the assessee has filed necessary evidences including fact finding report of sales team manager and also the quotations received from prospective buyers of the goods which prove the real valuation of slow moving items. There is no error or infirmity in the findings given by the AO and accordingly we confirm the findings of Ld.CIT(A) and reject ground taken by the revenue as well as the assessee. Addition towards transportation charges paid by the assessee which is consequential to the loss on sales returns claimed for the year - AO has disallowed transportation charges incurred by the assessee for the same reasons, on which he has disallowed loss claimed on sales returns - Held that:- AO has given categorical finding in respect of transportation charges paid by the assessee where he has admitted that the parties, who have appeared before him have accepted the fact that they transported goods and also received payments. The fact that certain parties have not appeared before the AO may not be a solid reason for disbelieving total transactions. CIT(A), after considering relevant facts and also taking into account remand report of the AO allowed relief towards addition made by the AO, except to the extent of ₹ 6,09,917 in respect of two parties from whom no information has been received. Facts remain unchanged. The revenue fails to bring on record any evidence to controvert the findings of fact recorded by the CIT(A). Hence, we are inclined to uphold findings of CIT(A) and reject ground taken by the assessee as well as the revenue. Addition made by the AO towards alleged unproved purchases - Held that:- AO has examined the issue by calling for various details for which the parties have appeared before the AO and admitted of having done transactions with the assessee. Although, certain parties have not appeared before the AO, but those who appeared before the AO has admitted that the observations made by the AO in his assessment order is incorrect and the transaction with the assessee is genuine for which they have furnished necessary evidence. CIT(A) has considered all these facts and came to the conclusion that the loss claimed by the assessee on account of sale of sale of returned goods is genuine in nature and accordingly, deleted addition made by the AO, except to the extent of ₹ 9,85,76,986 in respect of 3 parties. Disallowance of depreciation claimed on texturised unit - unit has not functioned during the year and such finding is based on the fact that there was no sale / income from this unit - Held that:-Hon’ble Delhi High Court in the case of CIT vs Oswal Agro Mills Ltd [2010 (12) TMI 947 - DELHI HIGH COURT] where it was held that depreciation is allowed on block of asset and the revenue cannot segregate a particular asset therefrom on the ground that it was not put to use. In this case, on perusal of facts it is clear that the texturised unit is part of the textile plant of the assessee and the unit was functioning in the earlier years. Once a particular machinery has been put to use for the purpose of business, it is immaterial whether such plant & machinery has been used in the year under consideration and any revenue has been generated from such unit. The expression used “for the purpose of business” includes user of assets in the earlier years. Once, the machinery was available for use, though not actually used, falls within the expression used “for the purpose of business of the assessee” and claim the benefit of depreciation. The lower authorities without appreciating the fact, disallowed depreciation claimed on texturised unit, hence, we direct the AO to delete addition made towards depreciation claimed on texturised unit.
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2018 (10) TMI 236
TPA - comparable selection - functinal dissimilarity - Held that:- The appellant company is engaged in the business of trading of machines used for counting, accepting, sorting and authentication of cash. These machines are primarily used in banks. The Company also renders after sales support and maintenance services to its customers using such machines, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Computation of operating profit margin relates to foreign exchange loss and liabilities and provisions no longer required written back - Held that:- Once it has been held that the business profile of the appellant company has not changed from the past year, merely because there was a forex loss on account of fall in rupee, the same cannot justify the treatment of forex loss as non-operating in A.Y 2009-10. In our considered view, there should be consistency in the approach of the assessee and since the assessee has taken a very inconsistent view in A.Y 2009-10 and the DRP has rightly treated the forex loss as part of operating profit, we do not find any reason to interfere with the same. Liabilities and provisions written back - Held that:- The liabilities and provisions written off in earlier years were taken as part of operating profit, therefore, when the same are written back, they must be considered as operating in nature for computation of operating profit margin. We direct accordingly. Treatment of income received by the assessee from rendering management support services to its AEs as non-operating in nature - notionally attributing non-operating expenses to the management support service income - Held that:- We find that on the one hand the TPO has treated the management support service income of ₹ 10,507,777/- as non operating and corresponding expenses of ₹ 97,15,490/- have been considered as operating in nature, thereby blowing hot and cold in the same breath. If management support services income is considered as non-operating, then corresponding expenses incurred while rendering such services should be considered as non operating instead of notional amount of ₹ 60,114/-. While deciding this ground against the assessee, we direct the TPO/Assessing Officer to consider the actual expenditure of 97,15,490/- for allocation towards management support service income of ₹ 1,05,07,777/- considered as non operating. This ground is partly allowed. Disallowance of provisions for warrantee - Held that:- We find that the machines are supplied to various parts of the country and there are different costs of providing warrantee services in different parts, which mean that in some regions there are few machines but to meet the warrantee obligations, engineers have to be stationed there. The distance of the machine from the engineer’s location is also a relevant factor, since long distance transfers require additional expenditure to be incurred. Usage of the machines differ from customer to customer. There is no dispute that the warrantee obligation is inbuilt in the purchase order/agreement and the warrantee provision is not a contingent liability and it is quite certain that the expenses would be incurred in meeting the warrantee obligation linked to the sales of the current year in the following year. As in the case of Bharat Earth Movers Vs. CIT [2000 (8) TMI 4 - SUPREME COURT] has laid down that if a business liability has arisen in an accounting year, the deduction should be allowed although the liability may have to be quantified and discharged on a future date Disallowance of liquidated damages - Held that:- As relying on CPS CASH PROCESSING SOLUTIONS PRIVATE LTD. [FORMERLY KNOWN AS-DE LA RUE CASH PROCESSING SOLUTIONS INDIA PVT. LTD. VERSUS DCIT CIRCLE-1 (1) , GURGAON [2018 (7) TMI 224 - ITAT DELHI] The Clause prescribing the liability to pay liquidated damages arose at the point of time when the Company fail to deliver the machines on the due date and at that point of time the liability agreed which is a prudent trader it could quantify and take into account by means of trader. The Assessing Officer as well as the CIT(A) has not taken correct cognizance as to liquidated damages incurred by the company and accordingly deducted by the customers from the payment of sale proceeds is as per the agreed terms and contract. All these factors have not been properly assessed by the Assessing Officer as well as CIT(A).
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2018 (10) TMI 235
Reopening of assessment - assessee has taken accommodation entries in the form of bogus bills - Held that:- The assessee was in employment in earlier Assessment Year and drawing salary. Therefore, the fact that the assessee started business in this year only is reiterated. From the perusal of the balance sheet, it can be seen that the figure of ₹ 4,14,86,563/- is a amount for purchases which was not correctly taken by the Assessing Officer. Thus, the Assessing Officer has totally ignored the balance sheet of the assessee, despite filing the audited books of account. Therefore, the reasons recorded itself are incorrect and does not substantiate the re-opening/reassessment. Thus, the re-opening itself is bad in law and needs to be quashed. - Decided in favour of assessee.
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2018 (10) TMI 234
Penalty u/s. 271(1)(c) - debatable issue - Held that:- In view of the observations of the Tribunal in quantum proceedings, it is clear that the issue relating to which the penalty is levied is a debatable issue in respect of which no penalty could be levied. It is not a matter of either concealment of income or furnishing of inaccurate particulars of income, but it is only a question of application of law while making disallowance and that ended up in addition and consequent penalty proceedings such as penalty cannot be sustained. With this view of the matter, we quash the penalty proceedings and direct the AO to delete the penalty in dispute. - Decided in favour of assessee.
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2018 (10) TMI 233
Profit on sale of land - to be assessed from business income or short term capital gain - Held that:- Perusal of the order of the CIT(A) would indicate that neither the CIT(A) carved out any points of disputes nor recorded reasons for the decision. After looking into the record, he simply concurred with the AO. CIT(A) ought to have applied his independent mind on the facts collected by the AO and the explanation given by the assessee before the AO. CIT(A) failed to adhere to the procedure contemplated in section 250(6) of the Act, therefore, orders of CIT(A) are not sustainable. We deem it appropriate to state here for the argument’s sake that even if it is assumed that there is a contributory negligence at the end of the assessee by not appearing before the ld.CIT(A), then also, punishment in the shape of tax liability on additions extracted (supra) is disproportionate to the negligence.
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2018 (10) TMI 203
TPA relating to merchandising activity - MAM selection - TPO has rejected the CUP and has applied TNMM and on appeal, the Ld. CIT (A) has modified the use of TNMM by the TPO and has applied RPM - comparable selection - Held that:- As apparent from the entire factual matrix that the issue has not been dealt with properly by the lower authorities so as to reach a logical and reasonable conclusion. Similarly, with respect to the international transaction relating to sale of rice, the assessee has applied CUP which was based on quotations of a broker whereas the TPO has applied TNMM. TPO has included comparables like Satnam Ovedrseas Ltd. and KRBL Ltd. which were into manufacturing whereas the assessee’s case is that it was only into trading activity. Further, the Ld. CIT (A), while confirming the inclusion of Satnam Overseas Ltd. and KRBL Ltd., has also included FCI and KRIBHCO Ltd. to which the assessee’s objection is that these both were hugely subsidized companies whereas the assessee did not have any benefit of any subsidy and, therefore, the PLI would be at a great variance if these two companies were considered as comparables. Thus, the assessee is aggrieved by the action of both the lower authorities in respect of trading segments also and analysis of the factual matrix shows that the lower authorities have also not duly considered the averments of the assessee in respect of the trading transactions. The facts in AY 06-07 and in the year under consideration are identical except the fact that during the year under consideration, the assessee was not into any manufacturing activity except processing of crude oil. Accordingly, in view of the facts and circumstances of the case, we deem it appropriate to remit the entire issue of transfer pricing to the office of the Assessing Officer/ TPO who will readjudicate the issue de novo. Disallowance of miscellaneous expenses - CIT(A) had entertained fresh evidences/submissions filed by the assessee without affording a reasonable opportunity to the Assessing Officer - Held that:- AR has submitted that he has no objection if the issue is restored to the file of the Assessing Officer for verification. Accordingly, we restore the issue of disallowance of miscellaneous expenses to the file of the Assessing Officer with the direction to examine the claim of the assessee in light of the details and evidences which the assessee would like to file in this regard and thereafter adjudicate the issue in accordance with law after giving proper opportunity to the assessee to present its case. Thus, ground no. 1 of the department’s appeal stands allowed for statistical purposes. Addition on account of restricting the claim of the assessee on managerial remuneration - Held that:- It is undisputed that the issue is covered in favour of the assessee by the judgment of Nonsuch Tea Estate (1974 (11) TMI 5 - SUPREME COURT). However, it is the contention of the department that the Assessing Officer was not given an opportunity to examine and consider the letter of approval based on which the Ld. CIT(A) has allowed relief to the assessee. Looking into the facts of the case, we find that since the letter of approval has emanated from a government body and the same has been duly examined and considered by an Income Tax authority whose power is co-terminus with the power of the Assessing Officer, there is no need to interfere with the findings of the Ld. CIT (A) Disallowance of quality allowance paid to dealers - assessee did not provide ledger accounts and other documentary evidences in support of the claim whereas the CIT (A) allowed relief to the assessee on the ground that the Assessing Officer had not asked the assessee to provide ledger accounts and other documentary evidence and had only asked the assessee to explain the nature and methodology of calculating the quality allowance - Held that:- The fact does remain that the documentary evidences in support of the assessee’s claim of deduction in respect of quality allowance was not examined by either of the lower authorities. Accordingly, it will be in the fitness of things if the issue is restored to the file of the Assessing Officer for re-examining the issue in light of all the documentary evidences which the assessee would wish to submit in support of its claim after giving due opportunity to the assessee. We direct accordingly and ground no. 3 of the department’s appeal stands allowed for statistical purposes. Unsubstantiated legal and professional expenses - substantial increase in the legal and professional expenses in the year under consideration as compared to the immediately preceding year - Held that:- CIT (A), while allowing relief to the assessee, has given relief to the assessee on the ground that the expenses were incurred in the normal course of business and further that the Assessing Officer could not question the commercial expediency of the assessee. However, the fact remains that the evidences in support of the expenses having been incurred were not examined at any stage. Accordingly, this issue is also restored to the file of the Assessing Officer for the purpose of examining the issue afresh in light of the evidences and explanations which the assessee might like to file in this regard. The Assessing Officer is directed to afford a proper opportunity to the assessee before adjudication of the issue. Depreciation on computer peripherals - @25% as against 60% - Held that:- We are in agreement with the averments of the Ld. AR that the issue stands covered in favour of the assessee by a judgment of the Hon’ble Delhi High Court in the case of BSES Rajdhani Power Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT) and accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) on this issue allowing depreciation @ 60%. Disallowance on account of service income receivable written off during the year - Held that:- Restore this issue to the file of the Assessing Officer with the direction that the Assessing Officer should verify whether the impugned amounts were written off during the year under consideration or not and if they have been so written off, he is directed to allow the same as deduction
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Customs
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2018 (10) TMI 228
Claim of damage for loss of job and mental disturbance due to Customs Investigation Proceedings - Company secretary being CFO - Validity of statement made in quasi-judicial proceedings by the MD of the company against the CFO - the Plaintiff alleges a tort of malicious implication, which has no basis. The defendant alleges that the Plaintiff alleges malicious prosecution, the preconditions of which are not satisfied. Obviously, the tort is not well identified in the Plaint - whether there is any tort made out in the present case, the nature of the proceedings needs to be considered? - Section 108 of the Customs Act, 1962. Held that:- The pleadings in the amended suit primarily relate to an allegation of malicious implication resulting in loss of reputation. Thus, the allegation is one of defamation and nothing more, though the Plaint is not happily worded. The Plaintiff does not allege malicious prosecution and further, the elements of malicious prosecution are not made out - Malicious implication is nothing but wrongful implication leading to loss of reputation i.e. defamation/libel/slander. There is no other tort of malicious implication which can be separately sued for. The Plaintiff has not been able to show any judgment where the so called tort of malicious implication has resulted in a cause of action. The Plaintiff has merely relied upon judgments to argue that the question of limitation is a mixed question of facts and law. This Court has already held that the suit is not barred by limitation. The question is whether the suit is otherwise barred. In the present case, all the statements which are relied upon which form the basis of cause of action in the suit having been made before DRI officials/Customs Authorities, in statements recorded under Section 108 of the Customs Act, 1962. There is no publication of the said statements. Mr. Oike in fact having also retracted the same, no case of defamation is made out. As per the settled law, statements made in judicial and quasi-judicial proceedings before courts, authorities and tribunals are protected as being privileged. A suit for defamation on the basis of statements in such proceedings is clearly not maintainable. There is yet another dimension to this whole case. The Plaintiff is neither an uneducated nor an illiterate person who is not aware of the consequences of his actions of claiming experience in handling issues before the Customs Authorities and was also quite adept. The CFO of a company has enormous responsibility. The Plaintiff was responsible for legal and secretarial compliances in the Defendant company. Even if the Plaintiff had got wind of an alleged conspiracy by the Japanese officials, as is pleaded in the plaint, he had a duty to warn the Defendant company and its officials that the classification of machinery as dairy machinery instead of capital machinery would be contrary to law. Moreover, the Plaintiff not only did not warn the management of the Defendant but also went ahead and claimed the savings of the customs duty as a feather in his cap in his appraisal report. This shows that to say the least, he was not an innocent bystander. The statements made in quasi-judicial proceedings before the Customs Authorities cannot be held to be defamation/libel/slander. There is no tort made out in the present suit and the suit for compensation is not maintainable, in view of the settled law - plaint is rejected.
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2018 (10) TMI 227
Confiscation - redemption fine - export of misdeclared goods - Raw Cashew Nuts - Held that:- After noticing the fact that there were two contradictory reports, the adjudicating authority obtained a third report from another authority. All this this would require appreciation of impugned order in the context of the evidence before it. These are issues which are best agitated and resolved before the Appellate Authority under the Act - there is no reason to exercise our extra ordinary jurisdiction under Article 226 of the Constitution of India as efficacious alternate remedy is available under the Act from the impugned order dated 3 August 2018 - petition dismissed.
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2018 (10) TMI 226
Prohibition on operation of the petitioner as CHA - case of petitioner is that the respondent is not entitled to pass the impugned prohibition order without affording an opportunity of hearing to the petitioner by putting them on notice - violation of principles of natural justice - Regulation of 23 of Customs Broker Licensing Regulation, 2013. Held that:- Perusal of the said Regulation 23, no doubt, though indicate that no such notice was contemplated, however, the fact remains that the very same issue was already considered by this Court and the learned single Judge allowed the writ petition on the ground that the order of prohibition was passed in violation of principles of natural justice. When the said order was challenged by the Commissioner of Customs, Thoothukudi, the Division Bench, by its order in the case of Commissioner of Customs, Thoothukudi v. Daniel and Samuel Logistics P.Ltd. [2016 (3) TMI 609 - MADRAS HIGH COURT] confirmed the order of the Writ Court and dismiss the Writ Appeal - As the above said decision of the Division Bench of this Court is squarely covering the issue raised in this Writ Petition in favour of the petitioner and no contra decisions of this Court are placed before this Court by the learned counsel appearing for the respondents, this Court is of the view that the petitioner is entitled to succeed. The impugned order is set aside and the matter is remitted back to the respondent for passing fresh order on merits - Petition allowed by way of remand.
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2018 (10) TMI 225
Maintainability of petition - alternative statutory remedy of appeal - fulfillment of conditions and the obligations for export stipulated in the bond - appeallable order under Section 128 of the Customs Act, 1962. Section 128 of the said Act. Held that:- Initially, the writ petitioner has to exhaust the remedies provided under the Act. No writ petition can be entertained before exhausting the remedies provided under the Act, other than under exceptional circumstances. The writ petitioner is at liberty to redress his grievances by preferring an appeal before the competent authorities. If the writ petitioner states that he has already fulfilled the export obligations, even then, he is at liberty to pursue an application before the competent authorities for necessary action. However, in respect of the present writ petition, the relief as such sought for to quash the impugned demand notice cannot be granted. Petition dismissed.
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2018 (10) TMI 224
Classification of import goods - SYNVISC HYLAN G-F 20 medical device in sterile solution form for treatment of Osteoarthritis - Importer claimed classification of these as medical devices under Customs Tariff No. 90214090 and claimed the benefit of exemption notification No. 21/2002 (S.No. 370) and cleared the goods at nil rate of duty as applicable - demand of differential duty - extended period of limitation - penalty u/s 114A. Whether SYNVISC HYLAN G-F 20 imported by the appellant assessee is rightly classifiable under chapter heading No. 9021 or under chapter heading 3006 and consequently whether any differential duty liability arises? - Whether the interest is payable and penalties imposable? - Whether extended period of limitation can be invoked? Held that:- Chapter heading No. 3006 includes products such as Sterile laminaria, blood grouping reagents, diagnostic reagents designed to be administered to the patients, dental cements and other dental fillings, chemical contraceptive and Gel preparations used in human or veterinary medicines as a lubricant for parts of the body for surgical operations or physical examinations or as a coupling agent between the body and medical instruments. Chapter No. 9021 covers orthopaedic appliances including crutches, surgical belts and trusses, splints and other fracture appliances, artificial parts of the body, hearing aids and other appliances which are worn or carried, or implanted in the body to compensate for a defect or disability - it is found from the expert opinion of the Professor Head of Rheumatology of Nizam s Institute of Medical Sciences that the imported product is an absorbable implant in the knee joint for pain relief and improvement of joint mobility of the knee joints. There is nothing in this order to show why the goods which are imported cannot be classified as medical devices as claimed by the appellant. The literature produced by appellant as well as expert opinion produced by them clearly show that the goods in question are known as and used as implantable medical devices by doctors. Customs Tariff heading 3006 covers Gel preparations designed for humans as lubricant for parts of the body for surgical operations. This product does not appear to fall in this category as the purpose of this product is to facilitate lubricant of the joints and not to facilitate lubricant during the surgical operation. It compensates a defect which arises during osteoarthritis in the form of lack of lubrication in the knees. Therefore, the product is to be correctly classifiable under Customs Tariff Heading 9021 as an implantable medical device - the demand of duty, interest and penalty do not survive. Extended period of limitation - Held that:- Once the appellant has declared what is being imported in the invoice and the Bill of entry, they cannot be faulted for claiming a classification which, according to them is correct - Nothing prevented the assessing officer from seeking further literature and information and re-determining the classification if the classification claimed in the Bill of Entry is felt to be incorrect. Clearly, there is no evidence on record that the appellant assessee had misdeclared the nature of goods - Extended period cannot be invoked. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 223
Valuation of export goods - iron ore fines and lumps - under-valuation - rejection of declared export value as per Rule 8 of the Customs Valuation (determination of value of export goods) Rules, 2007 - determination of the value under Rule 6, ignoring Rule 4. Held that:- As far as the question of rejection of transaction values is concerned, we find that Rule 8 of the Customs Valuation (determination of value of export goods) Rules, 2007 clearly lays down mechanism for rejection of the declared value. Rule 8 (2) (iii) states that the proper officer shall have the powers to raise doubt on the declared value based on certain reasons which may include the significant variation in value on which goods of like kind and quality are exported at or around same time in comparable quantities and comparable commercial transaction. It also provides for rejecting the value on the basis of the value being significantly higher compared to the market value of goods at the time of export. In this case, value declared in the shipping bills is clearly far below the other values which the Asst. Commissioner found and the shipping bills to other buyers by the same exporter as also the prices at which similar goods were exported to China from India. Therefore, we find that Asst. Commissioner is correct in doubting the accuracy of the value declared in the shipping bills and after hearing the appellant rejecting the same. However, after having rejected the value under Rule 8 he should have gone through Rules 4 to 6 in a sequence. The Asst. Commissioner has not determined the value in terms of Rule 4 on the ground that the same exporter has not exported the goods during the same month to other buyers. While the rejection of the transaction value under Rule 8 by the lower authority is correct, determining the value under Rule 6, ignoring Rule 4 is not correct because this Rule does not require exports to be made by the same exporter or within the same month for the Rule to apply. It is a fit case to be remanded to the original authority to re-determine the value in terms of Rule 4 of Customs Valuation (determination of value of export goods) Rules, 2007 - appeal allowed by way of remand.
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2018 (10) TMI 222
Detention of person under COFEPOSA Act - Illegal custody - recording of statement is voluntary or not - application for direction to the mobile companies to place on record the tower location of the telephones of DRI officials on the night of 01.09.2016. Held that:- In the instant case, accused has prayed that CDRs and tower locations of the accused as well as DRI officials are very necessary to prove that he was illegally detained in the custody by DRI officials and not produce before the Court within stipulated period of 24 hours from his arrest. A person arrested should not be held guilty and he should also be given opportunity to prove his defence. The CDRs and Tower locations can also prove the actual facts of the case and accused should be given right to produce evidence in his defence but the said evidence in form of CDRs and Tower location cannot be produce until get preserved by the 10 or directed to preserve by the Court. No prejudice shall be caused to the department in any manner, if this application is allowed and accused is granted opportunity to prove his defence. This application u/s. 91 Cr.P.C. is allowed and notice be issued to the concerned mobile operators, who are directed to preserve the CDRs and tower location of mobile phone of the accused Narender Kumar as well as the officers of DRI as mentioned in the application in para 12 and file the same in the Court within one months from today - application disposed off.
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Corporate Laws
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2018 (10) TMI 229
Cartilisation - Bid rigging - Violation of provisions of Section 3(3)(d) of the Competition Act, 2002 - appellants/suppliers of Liquefied Petroleum Gas (LPG) Cylinders to the Indian Oil Corporation Ltd. (for short, ‘IOCL’) had indulged in cartilisation, thereby influencing and rigging the prices - penalties inflicted on the suppliers stand reduced - collusive tendering - situation of oligopsony - Held that:- 12 new entrants cannot be considered as entry of very few new suppliers where the existing suppliers were only 50. Identical products along with market conditions for which there would be only three buyers, in fact, would go in favour of the appellants. The factor of repetitive bidding, though appears to be a factor against the appellants, was also possible in the aforesaid scneario. The prevailing conditions in fact rule out the possibility of much price variations and all the manufacturers are virtually forced to submit their bid with a price that is quite close to each other. Therefore, it became necessary to sustain themselves in the market. Hence, the factor that these suppliers are from different region having different cost of manufacture would lose its significance. It is a situation where prime condition is to quote the price at which a particular manufacturer can bag an order even when its manufacturing cost is more than the manufacturing cost of others. The main purpose for such a manufacuring would be to remain in the fray and not to lose out. Therefore, it would be ready to accept lesser margin. This would answer why there were near identical bids despite varying cost. Insofar as meeting of bidders in Mumbai just before the date of submission of tender is concerned, some aspects pointed out by the appellants are not considered by the CCI or the COMPAT at all. No doubt, the meeting took place a couple of days before the date of tender. No doubt, the absence of agenda coming on record would not make much difference. However, only 19 appellants had attended that meeting. Many others were not even members or did not attend the meeting. In spite thereof, even they quoted almost same rates as the one who attended the meeting. This would lead us to the inference that reason for quoting similar price was not the meeting but something else. The question is what would be the other reason and whether the appellants have been able to satisfactorily explain that and rebut the presumption against them? The explanation is market conditions leading to the situation of oligopsony that prevailed because of limited buyers and influence of buyers in the fixation of prices was all prevalent. This seems to be convincing in the given set of facts. The situation of oligopsony can be both ways. There may be a situation where the sellers are few and they may control the market and by their concerted action indulge into cartelization. It may also be, as in the present case, a situation where buyers are few and that results in the situation of oligopsony with the control of buyers. Monopsony consists of a market with a single buyer. When there are only few buyers the market is described as an oligopsony. What is emphasised is that in such a situation a manufacturer with no buyers will have to exit from the trade. Therefore, first condition of oligopsony stands fulfilled. The other condition for the existence of oligopsony is whether the buyers have some influence over the price of their inputs. It is also to be seen as to whether the seller has any ability to raise prices or it stood reduced/eliminated by the aforesaid buyers. On a hollistic view of the matter, we find that the appellants have been able to discharge the onus by referring to various indicators which go on to show that parallel behaviour was not the result of any concerted practice. After taking note of the test that needs to be applied in such cases, which was laid down in Dyestuffs and accepted in Excel Crop Care Limited, we come to the conclusion that the inferences drawn by the CCI on the basis of evidence collected by it are duly rebutted by the appellants and the appellants have been able to discharge the onus that shifted upon them on the basis of factors pointed out by the CCI. However, at that stage, the CCI failed to carry the matter further by having required and necessary inquiry that was needed in the instant case. In such a watertight tender policy of IOCL which gave IOCL full control over the tendering process, it was necessary to summon IOCL. This would have cleared many aspects which are shrouded in mystery and the dust has not been cleared. We, thus, arrive at a conclusion that there is no sufficient evidence to hold that there was any agreement between the appellants for bid rigging. Accordingly, we allow these appeals and set aside the order of the Authorities below. As a consequence, since no penalty is payable, appeals of the CCI are rendered infructuous and dismissed as such. All the pending applications stand disposed of.
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Insolvency & Bankruptcy
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2018 (10) TMI 232
Corporate insolvency process - resolution deemed to be passed - deadlock created by the low percentage of votes cast by a new category of financial creditor - Real Estate (Commercial) and Real Estate (Residential) - Whether threshold of Voting shares’ in respect of the class of Financial Creditors Real Estate (Commercial) and Real Estate (Residential) as provided in various provisions of the Code (e.g. section 22(2) provides threshold of 66%) is mandatory - Held that:- In the present case merging of categories of all financial creditors and treating them as one would also amount to treating unequals as is equal which may result in violation of Article 14 of the Constitution. Therefore providing the same threshold for both categories may result to a declaration that those provisions are ultra vires of Article 14 of the Constitution. In choosing the authorised representative each one of them is not to participate for various reasons. Probably it is for the aforesaid reasons that in Regulation 16A of Insolvency and Bankruptcy Board of India (Insolvency Resolution process for corporate person) Regulation 2016 a provision has been made for selecting an insolvency profession which is choice of highest number of financial creditor in the class to act as authorised representative of the creditor of the respective class. If such a distinction is not implied then there is inherent danger of section 12(2), 12 A, 22(2), 27 (2), 28(3), 30(4), 33(2) & 21 (8) becoming unworkable and unconstitutional. It may thus be declared utra vires. In the case of Real Estate (Commercial & Residential) comprising 100% voting share in CoC the aforesaid provision must be read to mean that a resolution would be deemed to be passed if it is voted by highest number of financial creditors in the class of Real Estate (Commercial & Residential). It would make the court workable and would also advance the object of this progressive legislation rather than defeating it. We approve (Agenda No.5) the name of interim resolution professional by appointing him as resolution professional because he had secured largest percentage of voting share threshold. Accordingly Mr Vikram Bajaj, Flat No. 12, Vasudaha Apartment, Plot No. 41, Sector 9 Rohini Delhi-110085 is appointed as resolution professional who was earlier worked as interim resolution professional.
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2018 (10) TMI 231
Corporate Insolvency Resolution Process - default in repayment of the outstanding loan amount - Held that:- The applicant ‘financial creditor’ has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the outstanding loan amount. Moreover, it is seen that the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt. Thus in terms of Section 7(5)(a) of the Code, the present application is admitted.
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2018 (10) TMI 230
Liquidation proceedings - 60 days' delay has been taken in RP taking charge - 64 days be excluded while computing 180 days' time period of the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor - Alternatively, the Committee of Creditors (CoC) be directed to extend the CIRP time period for a further period of 90 days - Held that:- It is nothing but delay tactics to deprive the CoC from proceeding further to realise whatever that is remained in the company. There is no requirement to see the valuations or to see the Information Memorandum to order for liquidation u/s. 33 except seeing as to whether resolution plan has been received under sub-section (6) of Section 30 or the rejected resolution plan u/s. 31 of the Code. That being the legal proposition, there is no need to put the clock back to direct CoC for inviting EOI, and for receiving resolution plans, then to examine the same. In view of the reasons aforementioned, CoC not approving to invite resolution plans will not become non-compliance of the duties of the RP because this duty will cast upon the RP only when a decision has been approved by the CoC to invite resolution plans therefore, the RP not inviting resolution plans will not tantamount to non-compliance of Section 25(2)(h) of the Code. As to exclusion of 60 days from CIRP period, none of the applications filed by the parties can be considered as having grievance because as to RP is concerned, his only duty is to carry out the approvals given by the CoC, he cannot question that as to why CoC has not sought for extension of time, as to why CoC has not given approval for invitation of resolution plans. He is neither an Adjudicating Authority nor an officer to supervise the discretion vested with the CoC. Suspended directors cannot have any grievance to say that if the company is opted for resolution, they would get something out of the company. Here the principal stakeholders are the creditors, more specifically financial creditors whose interest is stuck in the Corporate Debtor, if they themselves opt for liquidation, such decision or indecision cannot be reversed so as to send it back to the CoC. Moreover, I say that this Adjudicating Authority has no jurisdiction either u/s. 31 or u/s. 33 to send it back to the CoC. The reason is, under Section 31 it has to either accept, reject or modify the resolution plan, under Section 33, it has to pass an order for liquidation when it is in compliance of 33(l)(a) or 33(l)(b) of the Code. Therefore, we have not found any merit in the application filed by the suspended directors as well. As to application filed by a company called Clean Coal Enterprises Pvt. Ltd. styling itself as prospective resolution applicant, I wonder what kind of locus it has, to file this application before this Bench when the CoC has not even invited resolution plans by giving an advertisement. This application is not only devoid of any merit but also abuse of process of law. As to MA filed by SREI Equipment Finance Ltd. having 2.79% voting share in the CoC seeking exclusion of 60 days' time, its voting share will not make any difference to any of the decisions of the CoC. First its voting share is miniscule moreover whatever that is required to be done within 270 days, i.e. to go for resolution or for liquidation, that exercise has already been taken place, discussion has happened in the CoC and voting has taken place. Voting has been fractured not weighing either side. In this backdrop, law does not permit this Bench to send it back to the CoC jumping all the provisions of law. CoC has discussed every issue accordingly, they voted therefore, whatever to be done within the CIRP period that has been done, and henceforth there is no requirement of exclusion of the period that has been mentioned in this application. In view of the same, we don't find any merit in this application filed by this financial creditor having 2.79% voting share in the CoC. This Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing a Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to RoC under which this Company has been registered.
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2018 (10) TMI 202
Corporate insolvency process - Adjudicating Authority refused to extend the period of scheme for further five years which was prepared by BIFR under the provisions of Sick Industrial Companies (Special Provisions), Act, 1985 - Held that:- In absence of any provision to review the scheme already sanctioned under sub-section (1) of Section 31 of the I&B Code, the Adjudicating Authority held that the scheme having already approved and as the company failed to turn its net worth positive within the period of sanctioned scheme, it will be presumed that the ‘corporate applicant’ has violated the sanctioned scheme, which will result in liquidation proceedings. Having heard the learned counsel for the parties, we also agree with the finding of the Adjudicating Authority that if the scheme sanctioned under sub-section (4) of Section 18 of SICA Act, 1985 is treated to be a scheme sanctioned under sub-section (1) of Section 31 of the I&B Code, which otherwise we do not accept, in such case also in absence of any provision of review of the scheme sanctioned under sub-section (1) of Section 31 of the I&B Code, no relief can be granted to the appellant.
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FEMA
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2018 (10) TMI 221
Non-supply of documents - proceedings on the basis of a complaint under FEMA - documents sought for, relied upon by the respondent-authorities to initiate proceedings against the petitioner, have not been furnished - Held that:- In the light of statement made by the respondent-authorities in their statement of objections that they are required to provide only relied upon documents and accepting their obligation to provide those documents to the petitioner and also having contended that such documents have already been furnished to the petitioner, this Court desist from going into the merits of the case at this stage, inasmuch as, it may prejudice the rights of either of the parties. This Courts finds that there is no good ground available to entertain this petition and accordingly, Petitions stand rejected.
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Service Tax
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2018 (10) TMI 220
Levy of Service Tax - construction of residential flat - The Court by its judgment in Suresh Kumar Bansal Ors. v. UOI Ors. [2016 (6) TMI 192 - DELHI HIGH COURT], upheld the contention and declared Section 65(105)(zzzh) as unconstitutional - Held that:- Having regard to the judgment in Suresh Kumar Bansal, the petitioner is clearly entitled to relief. Respondents shall process the petitioners claim on the basis of the documents particularly the remittance/payments made to the builder (respondent No.2) at relevant times; having regard to the invoices raised as well as the bank accounts statement in this regard - petition allowed.
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2018 (10) TMI 219
Refund of Service tax paid - Transportation of Goods by Road Services - rejection on the ground that the goods manufactured and exported by them were exempted from payment of excise duty by virtue of N/N. 4/2006 CE dated 01.03.2006 and in terms of Rule 6(1) of Cenvat Credit Rules they were barred from availing the cenvat credit. Held that:- The Commissioner (Appeals) has rightly held that the respondents are entitled to cenvat credit and there is no provisions contained in Rule 6(1) of the Cenvat Credit Rules when the final product is exempted from Central Excise duty by virtue of Notification 4/2006 CE dated 01.03.2006 - the Commissioner (Appeals) has relied upon various decisions which have consistently held that the assessee is entitled to avail credit of service tax paid on input services when they are producing exempted excisable goods which are chargeable to ‘nil’ rate of duty. The Hon’ble Karnataka High Court in the case of Commissioner of Customs Vs. ANZ International [2008 (6) TMI 155 - KARNATAKA HIGH COURT] has held that the provisions of Rule 6 of Cenvat Credit Rules are not applicable when the goods are exported under bond. There is no infirmity in the impugned order passed by the Commissioner (Appeals) based on the decision of the High Court - appeal dismissed - decided against Revenue.
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2018 (10) TMI 218
Erection, commissioning and installation services - services provided to Jaipur Vidhyuth Vitharan Nigam Limited (JVVNL), Jaipur - Providing & Fixing of Street Lights on PCC Pole or otherwise i.e. work in relation to lighting on public utility road - Electrification and Lighting - Shifting of overhead cables/ wires and laying of cables under or alongside roads - CBEC Circular No. 123/5/2010-TRU dated 24th May, 2010 - Composition Scheme - Composite Work Contract prior to 1st June, 2007 - time limitation. Taxability - Providing & Fixing of Street Lights on PCC Pole or otherwise i.e. work in relation to lighting on public utility road - Electrification and Lighting - Shifting of overhead cables/ wires and laying of cables under or alongside roads - Held that:- Applying the Circular to the services still confirmed by the adjudicating authority below, we observe that the providing and fixing of streetlights is taxable. Therefore, the demand for the said category is held to have rightly been confirmed - Electrification is covered under clause 7 of the above Circular as taxable work. Therefore, this demand is also held to have rightly been confirmed - However, shifting of overhead cables/ wires or along side roads for any reason as widening/renovation of the roads is specifically not taxable as per entry No.1 of the said Circular. Benefit of Composition Scheme and cum-tax benefit - Held that:- The work orders are perused. It becomes clear that these are not the work orders for the services simplicitor or for sale of goods simplicitor but involves both the elements in such a manner that the contracts are indivisible - the contracts are opined to fall under the category of works contract services. It has also been observed that the introduction of work contract service came w.e.f. 1st June, 2007. Even the adjudicating authority has acknowledged the activity of the appellant to be covered under para (a) & (e) of sub clause (ii) of the definition of works contract service. But despite the said findings, the Commissioner is opined to have committed an error while holding that with the introduction of work contract service classification of certain services could undergo a change and merely because certain services got covered under works contract service, it does not necessarily mean that the same service was not classifiable under any other pre-existing taxable category i.e. errection, commissioning or installation services. Composite Work Contract prior to 1st June, 2007 - Held that:- The service which is in the nature of Composite Work Contract cannot be put to tax before 1st June, 2007. Hence, the entire demand confirmed by the adjudicating authority for the period prior to 2007 is held to have wrongly confirmed. The same is hereby set aside. However, for the subsequent period, since the activity is work contract service and there is a Composition Scheme as per the provisions of Composition Rules issued under Notification 32/2007 dated 22nd May, 2007 vide which an option is available to pay Service Tax at the rate of 2 % upto 1st of March, 2008 and at the rate of 4 % w.e.f. 1st of March, 2008 on the gross amount charged for the works contract instead of paying the regular duty. The appellant is entitled to opt for Composition Scheme. The said benefit is denied by the adjudicating authority below merely on the ground that the appellant has failed to exercise the said option prior to the payment of Service Tax in respect of the respected works contract, but to our opinion, that is merely a procedural lapse - Otherwise also Composition Scheme is a beneficial legislation and the inclination shall always be in favour of the assessee in case of any legislation benefiting him. The commissioner is therefore opined to have committed a mistake while declining the said benefit. But, simultaneously it is also apparent on record that the regular duty applicable was 10.3% whereas the appellant has paid the said duty at the rate of 12.3%. This means that the appellant opted to not to pay under Composition Scheme. Time limitation - Held that:- Though the Department has taken the plea that there is a clear recital in the order under challenge about the appellant to have been non-cooperative while providing the documents but the meticulous table in the order itself falsifies that argument and there is observed no other act of appellant on record of alleged non-cooperation. Otherwise also the activity was of composite nature and was not simplicitor of errection, commissioning or installation - Hence, appellant is held to have a bonafide impression of no tax liability. As a result, the Department is held not liable to invoke the extended period of limitation. The confirmed demand can be confined only for the year 2009-10. The major drop of the demand otherwise has not challenged by the Department. The order with respect to the demand for the year 2009-10 as mentioned in chart in Order-in-Original except for the demand of ₹ 2,66,303/- for Railway, Ajmere is hereby upheld - Rest of the demand has though taxable but is hereby set aside being barred by time - Appellant is held to be entitled for the benefit of Composition Scheme but is observed to have not opted for it. Appeal allowed in part.
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2018 (10) TMI 217
Banking and Other Financial Services - Financial lease/Operational lease - leasing of oxygen plant equipment - Lease Rentals - Circular DOF No.334/1/2007-TRU dt.28.2.2007 - Whether the lease rentals received by the appellants from M/s. UML would fall within the definition of ‘Banking and Other Financial Services’ or would fall within the meaning of ‘Operating Lease’? - Held that:- On going through the agreement, for establishment of VPSA based oxygen plant between M/s. Usha Beltron Ltd. (M/s. UML) and the appellants, we find at para 1.7 that subject to other provisions of this agreement, title to all oxygen plant equipment will remain vested in Praxair. Praxair shall remain at all times the sole and absolute owner thereof and no right, ownership, title or interest therein (save and accept for the lease hold rights aforesaid) shall pass to USAD. Praxair shall be entitled to put its name plates or markings on any part of the oxygen plant or oxygen plant equipment indicating Praxair’s title and interest therein. USAD shall at no time contest or challenge Praxair’s sole and exclusive ownership of the oxygen plant equipment or any part thereof - the demands raised against the appellants for leasing the oxygen plant equipment are not sustainable in law. Management, Maintenance or Repair Services - Whether the service tax demanded on ‘Management, Maintenance or Repair Service’ is sustainable in law? - Held that:- The appellants have entered into an agreement dated 30.12.2006 for establishment of VPSA based oxygen plant with M/s. UML. Para 2 of the agreement deals with operation and maintenance of the plant. As per the agreement, for OM service rendered by the appellants, M/s. UML will pay the appellant the amounts specified in Schedule 4 of the agreement - the appellants are rendering OM services to the plant which is under lease to M/s. UML. The appellants are also charging M/s. UML for this particular O&M services. If it were the case of the appellant that the service rendered was to themselves, there was no need whatsoever for M/s. UML to pay the appellants for O&M charges in terms of the agreement - Demand upheld. Storage and Warehousing Service - Whether the service tax demanded on ‘Storage and Warehousing Service’ is sustainable? - Held that:- The appellants have entered into an agreement dated 1.8.1999 with M/s. UML. As per the agreement, PIPL deliver liquid oxygen into the storage installations and would permit the buyer (UML) to use the storage facility subject to clause 10 of the agreement regarding the use of the installation exclusively by M/s. UML. It is evident that the appellants have not rendered any warehousing services. It is not the case where the appellants hold a storage facility in their own premises and customers will come with their goods to the facility to deposit /store the goods for a period of time. No warehousing activities are involved as the appellants have built an oxygen tank in the premises of their customers and have leased the same to the customers. The appellants are not concerned with the receipt, storage and clearance of the goods stored in the tanks. They do not maintain any accounts for that matter in this regard. They have only leased out the tanks for a certain period of time for a consideration. This in itself will not constitute warehousing and storage operations, therefore, the demands raised against the appellants on this count are not maintainable - demand not sustainable. Penalties - Held that:- As the issue relates to interpretation of the provisions of service tax, penalties are set aside. The impugned orders are sustained only to the extent of demand of service tax on ‘Management, Maintenance or Repair Services - Appeal allowed in part.
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2018 (10) TMI 216
Quantification of Refund - duty paid under protest - case of appellant is the amount of refund was wrongly calculated by the Asst. Commissioner in his Order-in-Original by shifting the relevant date for reversal of CENVAT credit under Rule 11 (3) of CENVAT Credit Rules, 2004 from 01.03.2007 to 21.04.2007 - N/N. 06/2006 dated 01.03.2006 - unjust enrichment. Whether the appellant is entitled to the benefit of the exemption notification as claimed? Whether the appellant is required to reverse the CENVAT credit under Rule 11 (3) of CCR, 2004? If so, what is the relevant date for determining the amount of credit to be reversed? Whether the refund claim is hit by the principle of unjust enrichment/ Eligibility of exemption notification - Held that:- There is no dispute that the appellant has entered into contract with HMWSSB for supply and laying of the pipes and that they had paid the duty under protest. It is also not in dispute that they have subsequently obtained the Certificate from the District Collector which has been examined by the lower authority and found in order while deciding on the refund claim. Therefore, the appellant is entitled to the benefit of exemption notification. Since the appellant is entitled to the full exemption under the notification they are required to reverse the CENVAT credit in terms of Rule 11 (3) of CCR, 2004 from the date on which they have started claiming the exemption notification. In other words, they are supposed to reverse the CENVAT credit of the inputs lying in stock and the inputs which have been gone into the goods lying in stock on that date. In this case, the date is 01.03.2007. The lower authority has erroneously shifted this date to 21.04.2007 without any legal basis. Unjust enrichment - Held that:- The appellant has entered into a composite contract which included supply of pipes as well as laying, commissioning, etc. The bill of materials as per the contract indicates the cost of the pipes plus the applicable excise duty and determines the amount payable for the pipes after deducting the duty element. The client has also given a Certificate to the effect that they have not reimbursed any excise duty to the appellant. Further, the CA’s Certificate produced by the appellant also indicated that they have absorbed the cost of excise duty paid by them and they have not passed on the same to their clients - In view of these facts and circumstances, it is found that the appellant has not passed on the burden of excise duty either directly or indirectly to their client. In this case, the bill of materials in the contract shows that the amount to be paid per pipe includes only the basic cost of the pipe (not the excise duty) plus cost of laying the pipes, etc. This is further strengthened by the CA’s Certificate produced by the appellant. In view of the above, we find that the appellant has not passed on the burden of the excise duty either directly or indirectly to their clients and satisfies the requirement to claim refund without being hit by the clause of unjust enrichment - Therefore, their application for refund is not hit by the principle of unjust enrichment. The appellant is entitled to the refund of excise duty paid by them after adjusting the amount of CENVAT credit under Rule 11 (3) of CCR, 2004 calculated as on the date on which they have claimed the benefit of the exemption. Appeal disposed off.
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2018 (10) TMI 215
Voluntary Compliance Encouragement Scheme (VCES) - VCES rejected on the ground that they had failed to make deposit of 50% of Service Tax amount declared by the due date - Works Contract Services - appropriation of the amount for payment of Service tax - penalties. Held that:- It is a fact that, while filing the VCES declaration the Appellants have failed to fulfill the requirements prescribed for the said scheme. The declaration was to be filed and appellants were required to deposit the 50% of admitted tax liability by 31.12.2013. However the appellants have failed to comply with the said requirement, as they had filed the challans in respect of their unit in Vishakhapatnam. The submissions made by the appellants to the effect that the payments made by them in against the STC No of Vishakhapatnam unit should be considered as payment made for their Goa unit is devoid of merits - There may be errors committed in day to day functioning but not in case when a person is specifically opting for the beneficial scheme. It is also settled principle in law that every prescribed condition cannot be brushed aside as procedural and act of the person justified as bonafide, just to promote the cause of the appellants. It is also settled principle in law that no one should be allowed to take benefit of his own wrongs. (commodum ex injuria sua non habere debet and nullus commodum capers potest de injuria sua propria.) - In the present case undisputedly appellants had been evading the payment of Service Tax during the period 2011 onwards. VCES scheme was intended to help the persons, who would like to discharge the tax liability and was a onetime measure. Since the appellants were evading the payment of tax willfully during the relevant period they cannot claim benefit of such scheme without showing the compliance in respect of the scheme. Appellants had filed the declaration under the VCES scheme on 31.12.2013, along with the challans dated 29.12.2013 & 30.12.2013. Since the declaration was filed only on the last date for making 50% of the payments under the scheme, they had virtually denied the departments the opportunity of any cross verification. Further even if it is accepted that the error was made while filing the challans in first instance, appellants, should have established their bonafides by filing the challans for remaining amount in correct manner which they failed to do. Appropriation of amount paid by the amount under STC No of the Vishakhapatnam unit for payment of Service Tax liability confirmed by them against the unit in Goa - Held that:- The said adjustment has ben allowed by the Commissioner in light of the decisions in case Devang Paper Mils Pvt Ltd [2016 (1) TMI 389 - GUJARAT HIGH COURT]. Penalty - Held that:- During the relevant period and time appellants have knowingly and willingly suppressed the value of taxable service and the tax due with intention to evade payment of tax. It was only when the investigations were started against the unit by DGCEI in March 2013, that Appellants came forward and made certain deposits towards the tax payment - Appellant were liable to penal action under Section 78 of the Finance Act, 1994, as all the ingredient required to invoke the said section are present in this case - Since appellants have not filed the ST-3 returns during the relevant period Commissioner was also correct in imposing penalty under Section 77 of the Finance Act, 1994 - penalties upheld. Appeal dismissed.
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2018 (10) TMI 214
Imposition of penalty - Reverse Charge Mechanism - Banking and other Financial Services - appellants held a bona fide belief that provider of the service i.e. SWIFT, since situated outside India and the recipients of service were also situated outside India, the services provided by SWIFT, would not be taxable in India. Held that:- It is not in dispute that the appellants have paid the entire amount of Service Tax for the services received from the overseas provider of services i.e. SWIFT during the relevant period and liable to discharge Service Tax under reverse charge mechanism. The applicability of Service Tax under reverse charge mechanism though has been introduced by insertion of Section 66A of the Finance Act, 1994, but ultimately the issue is settled by the Hon'ble Supreme Court in Indian National Ship Owners Association case [2009 (12) TMI 850 - SUPREME COURT OF INDIA] - Thus, there is sufficient cause for not discharging Service Tax by the appellant during the period in dispute. Penalty set aside by invoking section 80 - demand of Service tax with Interest upheld - appeal allowed in part.
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Central Excise
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2018 (10) TMI 213
Manufacture - conversion of tissue papers, C-fold tissue, M-fold tissue, paper napkin/serviette of different sizes, toilet roll, kitchen roll, JRT roll and HRT roll etc. from jumbo rolls of paper - Held that:- Issue notice in the civil appeal as well as in the application for stay, returnable in four weeks.
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2018 (10) TMI 212
Principles of Natural Justice - non-speaking order - Whether in the facts and circumstances of the case and in law, is the order of the Tribunal is in breach of principle of natural justice inasmuch as it does not deal with Appellant's appeal in respect of penalty and yet dismissed it for reason for having confirmed the duty demand and penalty in the case of partnership firm in which the Appellant is a partner? Held that:- The impugned order dated 17th April, 2017 to the extent it disposes of the Appellant's appeal, is a non-speaking order. Accordingly, the substantial question of law is answered in the affirmative i.e. in favour of the Appellant and against the Revenue - the impugned order dated 17th April, 2017 is set aside to the extent it relates to Appellant herein. Appeal of the Appellant herein before the Tribunal, is restored to it for fresh disposal, in accordance with law by a speaking order.
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2018 (10) TMI 211
Condonation of delay of 23 days in filing appeal - reasons stated is that the Counsel Shri Aakash Gupta was ill for the period 25th June 2018 to 8th July 2018 which has resulted in the delay - Held that:- It is found that delay is explained to some part - we condone the delay subject to payment of cost of ₹ 5000/- payable in ‘Kerala Chief Minister Relief Fund’ on or before 1st November, 2018 and to tag appeal Nos. E/2224-2225/2012-EX.(DB) with this appeal.
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2018 (10) TMI 210
Clandestine removal - proceedings were initiated against one M/s Diwan Industries, a partnership firm - Revenue s stand is that since the proprietor of the present unit is a partner in M/s Diwan Industries and the arrears against the partnership firm can be recovered from the partners, the appropriation of the refund sanctioned to the proprietary unit is legal and proper. Held that:- A proprietary unit is an individual legal entity and any refunds due to the proprietary unit cannot be adjusted or appropriated towards the demand which may be pending recovery against an another independent legal entity, of which the proprietor of unit is a partner. It has to be kept in mind that the present proceeding are not recovery proceeding against the partnership firm so as to make the recoveries independently from the partners also. The dispute relates to the refund of the duty deposited by a proprietary unit and on success of their appeal before Tribunal such refunds have to be sanctioned to the proprietary unit. Any such adjustments against the dues of a partnership firm is neither justified nor proper nor legal. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 209
Penalty - case of appellant is that penalty equivalent to the differential duty cannot be imposed as they have discharged duty on the goods cleared from the factory to the depot - extended period of limitation - Held that:- As far as confirmation of demands invoking extended period of limitation are concerned, both the authorities below are right in their approach inasmuch as the fact of sale of the excisable goods at a higher price from the depots was not communicated to the department nor the related data was submitted to the department from time to time along with their liability to discharge the differential duty - penalty imposed under Section 11AC of the Central Excise Act, 1944 is upheld - however, the appellants are eligible to discharge 25% of the penalty on such amount, on fulfillment of the conditions laid down under the said provisions. In case of demand confirmed against notices issued periodically for normal period, we are of the opinion that a consolidated penalty of ₹ 1.00 lakh would meet the ends of justice. Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (10) TMI 208
Application for withdrawal of petition - Held that:- Issue notice, returnable in three weeks. Dasti, in addition, is permitted - Interim stay in the meanwhile.
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2018 (10) TMI 207
Certificate of tax exemption on 01.06.2006 - manufacture of detergent soap and detergent powder - Neither in the exemption certificate issued by the tax department nor in the eligibility certificate issued by the tax department nor in the eligibility certificate issued by the Board there was any mention that the tax exemption could be enjoyed only upto certain ceiling of manufacture or value of the specified goods. Held that:- The admitted position is that the exemption certificate issued by the Government did not indicate any limit upto which such exemption could be enjoyed. Though the Board had written a letter dated 06.03.2009 conveying the department that the assessee had exceeded the ceiling, there would no primary evidence of any such limit being set out by the Board. Admittedly, the department had written several letters to the Board asking for such details which were not forthcoming. The authorities therefore cannot proceed on the singular assertion of the Board in the said letter dated 06.03.2009. There was neither any exemption limit prescribed in the exemption certificate nor in the eligibility certificate nor there is any primary evidence of the Board having stayed such limit in any other communication or order - tax appeal dismissed.
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2018 (10) TMI 206
Validity of revised orders of assessment - grievance of the petitioner before this Court is that the respondent is not entitled to revise the assessment in respect of those two assessment years, when already the deemed assessment had taken place as early as in the month of October, 2014 & 2015, merely, because the petitioner has crossed the ceiling of ₹ 50 Lakhs in the subsequent assessment years. Held that:- The learned Government Advocate is not in a position to explain and satisfy this Court as to how the penalty under Section 27(3)(c) of the TNVAT Act, was levied on the petitioner, when the notice of proposal indicated that the same was proposed under Section 22(5) of the TNVAT Act - Further perusal of the impugned orders would also show that the petitioner was not provided with any personal hearing. No doubt, the notices of proposal indicated that either the petitioner in person or his authorized representative is entitled for personal hearing within 15 days on receipt of the said notice. However, it is seen that the respondent has not sent any further communication indicating the date of personal hearing to the petitioner. Therefore, this Court is of the view that, without expressing any view on the merits of the assessment, the matter needs to be remitted back to the respondent for re-considering the matter afresh, after giving due opportunity of hearing to the petitioner. The matter is remitted back to the respondent for passing fresh orders of assessment, after giving due opportunity of personal hearing to the petitioner - petition allowed by way of remand.
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2018 (10) TMI 205
Penalty - availing ITC - cancellation of seller's registration - It is claimed that the revisionist was not aware that the registration of the seller was cancelled - Held that:- The penalty proceeding which is initiated in the instant case against the revisionist, is totally illegal, arbitrary for the reason that in case if a registered dealer is effecting the purchases from a registered dealer whose registration is subsequently cancelled then in that event unless and until the purchaser is aware or is informed by the department it cannot be presumed that he was aware about the proceedings for cancellation of registration of a dealer/seller - The purchase of sand by the revisionist in the instant case, appears to be affected bona fidely as the revisionist was not aware about the fact that the seller who was affecting the sales is not a registered dealer or his registration is cancelled. The revisionist cannot be held guilty nor he is liable to pay the penalty - revision allowed.
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2018 (10) TMI 204
Validity of assessment order - TNVAT Act - the respondent, without providing an opportunity of personal hearing and without independent application of mind, has passed the impugned order - principles of Natural Justice - Held that:- Admittedly, a notice was issued by the respondent on 25.09.2017, for which objections were filed by the petitioner on 17.10.2017. The respondent, thereafter, ought to have fixed a date for personal hearing and communicated the same to the petitioner. A reading of the impugned orders reveal that no such exercise was done by the respondent. The Commissioner of Commercial Taxes, pursuant to the recommendations of the Hon'ble Justice Sri Ramanujam Committee, has laid down certain procedures to be followed by the assessing authority before passing final orders. That circular is binding on the respondent. It mandates that personal hearing shall be given even such an opportunity is asked or not. But, in contravention of the circular, without providing an opportunity of personal hearing after filing of the objections, the respondent has passed the impugned orders. A Division Bench of this Court in an unreported decision in G.V.Cotton Mills (P) Ltd., Rep. by its Managing Director Vs. The Assistant Commissioner (CT), Avarayampalayam Assessment Circle Corporation of Shopping Complex, Coimbatore, [2018 (3) TMI 1617 - MADRAS HIGH COURT], has held that the opportunity of personal hearing cannot be denied, even if the objections not filed. In this case, admittedly, the petitioner has submitted his objections. But, the respondent, after receipt of the said objections, has passed the impugned orders, without giving an opportunity of personal hearing. Therefore, on this ground alone, the impugned orders are liable to be set aside. The matter is remanded back to the file of the respondent for fresh consideration - appeal allowed by way of remand.
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