Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 12, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Liability of GST - e-procurement Transaction Fee collected on behalf of IT E&C department results - Though the activity constitutes supply but remains exempts as per the notification.
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Zero rated supplies under GST - The outward supplies made by the applicant to a) ocean going merchant ships which are in foreign run, b) Indian Navy ships, c) Indian Coast guard ships, will be treated as ‘exports’
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Migration from VAT to GST - Since the applicant reported that his turnovers from the past (3) years are below ₹ 20 lakhs, he may continue the GSTIN registration or may cancel the registration as per the provisions of Sec. 29 of APGST Act 2017.
Income Tax
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Transfer pricing - adjustment on account of capacity utilization - The adjustment can be rejected only on its merit after consideration of facts and not on the ground that it will lead to downward adjustment.
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Short deduction of TDS - CIT (A) has erred in deleting the demand particularly when assessment proceedings qua the year under assessment are already pending with the Department
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Initiation of re-assessment proceedings u/s. 147 - information is not synonymous to truth. Just because a letter has been received from the another CIT, the AO cannot reopen the completed assessment u/s. 143(3) of the Act.
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Revision u/s 263 - assessee has not accounted for interest income in the books of account on advance to IAL - Since the AO has considered the issue and applied his mind before passing the assessment order, CIT is not empowered to revise the order u/s 263.
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In the absence of search u/s 132, the consequential or incidental assessment proceedings u/s 153C will not entitle the AO to usurp jurisdiction u/s 271AAB for the purposes of imposition of penalty.
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Eligibility of deduction u/s 80IA - Here the project costs and source thereof not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services; it clearly is falling in the excluded category.
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Addition of closing stock - a suspicion has been created of being adopted a particular modus operandi by the assessee to inflate purchases and manipulate value of closing stock, but again we do not have any supporting evidence qua this suspicion - Addition restricted to adhoc amount.
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Special allowance or benefit, not being in the nature of a perquisite - Exemption u/s 10(14) - Atleast the assessee should have filed a certificate from the LIC for determining expenses possibly to be incurred by him for the purpose of procuring LIC business and earning incentive bonus.
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Levy of penalty u/s 271(1)(c) - Minor differences in estimation and consequent valuation are but natural and so long as fundamental methodology so adopted by the valuation officer are not disputed, such minor differences in valuation cannot form the basis for levy of penalty
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Validity of reopening of assessment - as the ‘reasons to believe’ are not only vague, but are found to militate against the mandate of law, thus, the same cannot be approved and the notice is liable to be struck down.
Customs
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Classification of imported goods - Blankets - Without challenging the observations of the ld. Commissioner, the appeal filed by the Revenue is not sustainable
Service Tax
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Online Information and Data base Access & Retrieval service - Import of services - The appellant can only access its own data and the data and information on the computer system belongs to the appellant and is neither owned nor provided by Globe Center - the appellant is not liable to pay service tax under reverse charge mechanism.
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The components such as preferred location charges, external development charges etc. are part and parcel and for various elements of the main service which is Residential Complex Service - appellants are eligible for abatement.
Central Excise
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100% EOU - exemption notification will be applicable even when the goods are exported against foreign exchange to DTA - the appellant is entitled to the benefit of Exemption Notification No. 2/95-CE dated 04.01.1995.
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Benefit of exemption - Pipes - There is nothing in the notification to suggest that the storage facility has to be of any particular size. There is also nothing in the notification which suggests that water supply plant should necessarily have some processing facility such as for desalination, purification, etc.
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Cenvat Credit – input services - GTA service – procurement of fly ash and supply of cements - round trip transport - freight charges for both types of transports were availed by the assessee - credit allowed.
VAT
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Sales Tax Practitioner cum Advocate - Disqualification u/s 81(2) of the Tax Act - allegation that appellant has committed misconduct - the petitioner is a legal practitioner and therefore the domain to conduct any investigation or issue a show cause notice would be that of the State Bar Council.
Case Laws:
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GST
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2018 (11) TMI 487
Liability of GST - Supply of goods and/or services - e-procurement Transaction Fee collected on behalf of IT E&C department results - Exemption from GST Held that:- As per the information filed by the applicant, it is observed that the applicant is acting as fund-manager. The applicant was directed by ITE&C Department, to open an account for collection of Transaction Fee relating to e-Procurement platform. Further, the applicant can not act independently for the utilization of funds without the approval of the ITE &C Department. Hence, the fund utilization, shall be in accordance & with the permission and approval of the ITE&C department only. The applicant will be paid service charges @ 5% on e-procurement corpus fund and e-procurement Transaction Fee towards services rendered by the applicant, for which they are paying tax as an independent entity for the services rendered to ITE&C. Hence, the transaction fee collected on account of ITE&C Department, as custodian will not attract the liability under the provisions of law. Ruling:- It is “Supply” as defined in SGST Act,2017 and CGST Act, 2017. The liability does not arise due to the amounts so collected is for services rendered by State Government i.e., ITE&C Department as per the entry no 6 of notification 12/2017-Central tax (Rate), dated :28th June 2017.
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2018 (11) TMI 486
Exemption from GST - outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships - zero rated supplies or not - Collection of GST from Ocean going merchant vessels on foreign run/ Indian Naval Ships/ Indian Coast Guard Ships or from their authorized agents. Held that:- As per section 88(A) of Customs Act, 1962, the goods supplied to merchant ships on foreign run will be treated as export. As per section 16 of IGST Act’2017, the exports will be treated as ‘zero’ rated supplies. Ruling:- The outward supplies made by the applicant to a) ocean going merchant ships which are in foreign run, b) Indian Navy ships, c) Indian Coast guard ships, will be treated as ‘exports’.
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2018 (11) TMI 485
Registration u/s 22 of CGST, SGST Acts 2017 - manufacturer of Biris - annual business turnover is less than ₹ 20 lakhs - no inter-state outward taxable supply - Held that:- Since the applicant reported that his turnovers from the past (3) years are below ₹ 20 lakhs, he may continue the GSTIN registration or may cancel the registration as per the provisions of Sec.29 of APGST Act 2017. Ruling:- The Registration under Sec.22 of APGST Act 2017/CGST Act 2017 is not mandatory for applicant, as per the existing provisions of law.
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2018 (11) TMI 484
Detention of goods due to mis-classification - submits that since dispute is regarding the misclassification, photographs shall be taken before the release of the goods - Held that:- It is directed that Photographs and negatives shall be taken with regard to the nature of the goods - Goods shall be released on furnishing Bank Guarantee, applicable to the petitioner.
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2018 (11) TMI 483
Detention of goods with vehicle - e-way bills had expired - Held that:- The respondent authorities are directed to release the petitioner's goods and vehicle on its "furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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Income Tax
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2018 (11) TMI 482
Accrual of income - Addition of deemed interest on advance - advance so made become non recoverable - as stated by the assessee that the money so advanced could not be recovered - Held that:- In the present case, it is not the case that the income has in fact accrued to the assessee. In fact, the recovery of the principal amount is in doubt. Moreover, the assessee has no where claimed as business advance, it was a simple loan on which the assessee was earning interest and offering the same for tax till A.Y. 2005-06, subsequent to it loan became bad and no interest was earned. Therefore, under the peculiarity of facts and in view of the judgement of the Hon'ble Supreme Court in the case of UCO Bank Vs. CIT [1999 (5) TMI 3 - SUPREME COURT] and State Bank of Indore Vs. ITO [2002 (7) TMI 90 - MADHYA PRADESH HIGH COURT] and the decision of the coordinate bench in the case of S.N. Chitale [2010 (5) TMI 934 - ITAT INDORE], we direct the A.O. to delete the addition. - Decided in favour of assessee.
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2018 (11) TMI 481
Adjustment on account of international transactions - adjustment on account of capacity utilization - DRP confirmed the action of the AO except the fact that it restricted the adjustment to international transaction only as against the adjustment made by the TPO at enterprise level - Held that:- Merely because consequent to such adjustment downward adjustment is required and such adjustment cannot be rejected. The adjustment can be rejected only on its merit after consideration of facts and not on the ground that it will lead to downward adjustment. In fact, it is the case of the assessee that downward adjustment is required in the facts of the case. As regards the documentation required for considering such adjustment, we are not in agreement with the contention of the Ld. DR that assessee is required to produce even that data which is not in public domain. We set aside this issue to the TPO and direct the TPO to examine the data placed by the assessee before it. The TPO shall also call for the information from the comparables by issue of notice under Section 133(6). While carrying out this exercise the TPO shall also examine the ‘unit’ in which such capacity utilization is to be measured. The TPO shall also examine the capacity utilization of the assessee company and will ensure that the capacity utilization of the assessee company i.e. the tested party and that of the comparables is on the same parameters which will include assets turnover ratio. After carrying out such exercise the TPO shall compute appropriate adjustment, if any, on account of capacity utilization. The TPO shall share the details so obtained with the assessee and decide the issue afresh after giving adequate opportunity to the assessee. Allowing the benefit of (+/-) 5% in terms of proviso to Section 92C(2)- Held that:- This ground is consequential to ground above. Since we have restored the issue of adjustment on account of arm’s length price to the TPO, this issue of allowing benefit of +/- 5% will be considered appropriately by the TPO as per the proviso to Section 92C(2) of the Act while computing the adjustment if any required to be made on account of arm’s length price. Additional depreciation under Section 32(1)(iia) in respect of the new plant and machinery added by the assessee during the year - Held that:- It is not the case of the Revenue that any of the items added during the year is hit by this proviso. If that be so, we see no reason to deny the benefit of additional depreciation. Accordingly, we direct the AO to allow the additional depreciation in respect of these items. Accordingly, Ground no. 2.1 is allowed.
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2018 (11) TMI 480
Short deduction of TDS on account of mentioning of the wrong PAN number - DTAA provision applicability - Held that:- Demand of short deduction of tds is not sustainable as it is not the case of short deduction but it is the case of wrongly applying the TDS rate by losing sight of DTAA between India and Netherland. Insofar as demand for fourth quarter (FY 2012-13) deduction for ₹ 2,10,200/- is concerned, the Revenue has treated this transaction with incorrect PAN numbers and has applied TDS @ 20%. It is also not in dispute that when the correct PAN numbers of the concerned employees is mentioned in the revised TDS return, the demand would come to nil. The assessee has agreed to deposit interest demand as well as late filing fee on account of late deposit of tax. When we examine all final assessment is still pending with the Department, the appeal filed by the assessee before ld. CIT (A) was not maintainable as the assessee has categorically made submission that interest demand on account of late deposit of tax and late filing of return, demand is being deposited by the assessee, there was no question of deleting the demand raised as all these facts were to be examined by the AO during assessment on the basis of submissions made by the assessee. Section 200A of the Act is a self-contained procedure to process the statement of tax deduction at source after making adjustment of any arithmetic error or incorrect claim. The assessee has made an undertaking before the Commissioner that it is revising the return for incorporating the PAN numbers of those employees which will otherwise lead to the demand nil and in case of demand for second quarter for FY 2013-14, no interest shall be charged as the demand itself would not be sustainable. CIT (A) has erred in deleting the demand particularly when assessment proceedings qua the year under assessment are already pending with the Department, hence present appeals filed by the Revenue are allowed.
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2018 (11) TMI 479
Initiation of re-assessment proceedings u/s. 147 - action after the expiry of 4 years from the end of the relevant assessment year - reason to believe - non independent application of ind by AO - letter has been received from the Ld. CIT-15, Kolkata - Held that:- Receipt of information from the Ld. CIT-15, Kolkata, no independent enquiry was also carried out by the AO himself before reaching his independent satisfaction that alleged escapement had actually occurred or that the assessee in fact was beneficiary of any sum received from Shri Chowdhury in the form of sale proceeds of sarees. In such a scenario, when the AO was in receipt of the information from the Ld. CIT-15, Kolkata he ought to have made enquiries to unravel the truth. It has to be remembered that information is not synonymous to truth. Just because a letter has been received from the Ld. CIT-15, Kolkata the AO cannot reopen the completed assessment u/s. 143(3) of the Act. 'Reason to suspect' based on an information can trigger an enquiry to find out whether there is any substance or material to substantiate that there is merit in the information adduced by the Ld. CIT-15, Kolkata and thereafter the AO has to take an independent decision to re-open or not. The reopening of assessment in the present case was done without satisfying the conditions precedent in Section 147 and for that reason the reopening is held to be corum non judice. Therefore, all proceeding subsequently made is 'null' in the eyes of law and so, we quash the notice of reopening u/s. 148 and subsequent orders of the AO and Ld. CIT(A) is also held to be null & void in the eyes of law. Accordingly the assessee succeeds on the legal issue challenged before us. - Decided in favour of assessee
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2018 (11) TMI 478
Reopening of assessment - addition u/s 69 - Held that:- The basis for relief in all the decisions is the finding of Hon’ble High Court which is on the basis of certain facts as correct as stated by Shri Chetan Gupta in his statement dated 26.03.2009 before the Assessing Officer wherein he declined any association with the Pendrive and also denied the fact that he was managing the funds of 148 odd people. It was primarily for this reason that the Hon’ble High Court granted relief. There is no evidence or material to support the addition made by the Assessing Officer, the addition made does not sustain. Therefore, issue relating to addition made u/s 69 of the Act on the basis of an alleged pen drive of Shri Chetan Gupta does not survive and the order of the CIT(A) is set aside. Inclusion of ALV of Bharatpur Project - Assessing Officer treated the Bharatpur property as self acquired property and computed the ALV of the Delhi property and brought to tax a sum of ₹ 7,44,055/-. - Held that:- The property at Bharatpur is in dilapidated condition, as such, same is incapable for let out and hence the ALV of such property cannot be brought to tax. But after going through the decision the ratio as appears in the decision of the Hon’ble High Court is on different issue and will not be applicable in the present case. Even the dilapidated property as its ALV and thus, the contentions of the Ld. AR does not sustain as the property always has the value. Therefore, Ground No. 6 to 6.1 are dismissed.
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2018 (11) TMI 477
Revision u/s 263 - assessee has not accounted for interest income in the books of account on advance to IAL - addition on account of interest on advance to IAL to the book profit u/s. 115JB - Held that:- Since there was significant uncertainty of ultimate collection of principal itself, so in accordance with Accounting Standard 9 on revenue recognition ('AS 9') issued by Institute of Chartered Accountants of India ('MCAI'), Assessee has not recognized any notional interest income on such advance in its audited financial statements. CIT(A) has further noted that it has been argued that since such notional interest on advance was not recognized as revenue in its audited books of accounts and also the same is not covered in any of the items listed in the Explanation to 1 section 115JB, it was not considered in the books profits for MAT purpose and was not offered to tax under provisions of section 115JB. However, out of abundant caution, such notional interest @ 8% i.e. of 1NR 12.80 Crores on the advance given to IAL was separately offered to tax under the normal provisions of the Act. Thus, we note that the assessee has clearly explained that this income was not accounted for in the books of account due to uncertainty. The accounts were duly audited. However, due to abundant caution it was offered in the computation of the normal income. The assessee has further explained that there was uncertainty so it was not accounted for in the books of account which was also accepted by the auditors. Hence, the assessee has not offered the same under MAT provision of section 115JB. From the above, it is amply clear that in the computation of income, the issue was apparent and upon that computation of income, the A.O. has passed the assessment order. Hence, on these facts, it cannot be said that the A.O. has not applied his mind. A.O. has duly applied his mind and accepted the income offered u/s.115JB which did not include this interest accrued amount as it was not provided in the books of account. Moreover the ld. CIT(A)’s opinion that the book profit needs to be reworked and the impugned amount added to book profit is not sustainable. - Decided in favour of assessee.
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2018 (11) TMI 476
TDS u/s 194C - contract of supply of material/food - non deduction of tds - assessee-company has purchased Chinese food from M/s Zen Chinese Food and sells those Chinese foods to its customers and charges the VAT thereon - Held that:- In preceding A.Ys. 2006-2007 and 2007-2008, ITAT, Delhi Bench in the case of assessee dismissed the departmental appeals on the same ground considering the Explanation-III to Section 194C of the I.T. Act noted that the transactions relate to sale of material which cannot be termed as contract for work and labour. Hence, Section 194C is not applicable in assessee’s case. Since assessee had paid VAT on sale of goods to its customers, Section 194C of the Act is not applicable. Therefore, provisions of section 40(a)(ia) applied by the A.O. is not justified. Entire addition have been deleted. - Decided in favour of assessee. Addition u/s 14A - absence of any expenditure shown for earning dividend income - Held that:- As onus is upon A.O. to record satisfaction that interest bearing funds have been used for investment to earn tax free income”. Since no borrowed funds have been used by assessee to make investment, therefore, Ld. CIT(A) correctly deleted the addition - Decided in favour of assessee.
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2018 (11) TMI 475
Penalty u/s 271AAB - no search had taken place in the case of the assessee per se u/s 132 - incidental assessment proceedings under s.153C validity - Held that:- It is manifest that applicability of Section 271AAB is integrally connected to search under s.132 of the Act. In the absence of search under s. 132 of the Act, the assessee has no occasion to avail the concessional treatment by way of admission under s.132(4) of the Act. Thus, we find obvious merits in the observations made by the first appellate authority that provisions of Section 271AAB of the Act are not applicable to the case of the assessee. In the absence of search under s.132 of the Act, the consequential or incidental assessment proceedings under s.153C of the Act will not, in our view, entitle the AO to usurp jurisdiction under s.271AAB of the Act for the purposes of imposition of penalty. - decided against revenue.
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2018 (11) TMI 474
Disallowance of renovation expenses - nature of expenses - revenue or capital expenditure - Held that:- AO accepted substantial renovation expenses incurred by assessee wholly and exclusively for the purpose of business. Thus, it was considered as Revenue expenditure. AO has not brought anything on record, as to on incurring renovation expenses what capital had been generated by the assessee. The nature of business clearly shows that renovation expenses are required to be incurred for smooth functioning of retail outlet of petrol pump. Since, turnover of assessee and GP rate have increased, therefore, there is no question of assessee inflating the expenditure so as to reduce the taxable income. The genuineness of the expenses are not in doubt. Thus hold that the entire expenses were incurred on account of Revenue expenditure - Decided in favour of assessee. TDS u/s 194C - non deduction of tds on advertisement expenses - disallowance u/s 40(a)(ia) - amount not exceeding in a year at ₹ 75,000/- - Held that:- Where the aggregate of the amounts of such sum credited or paid or likely to be credited or paid during the financial year exceeds ₹ 75,000/-, the person responsible for paying such sum referred to in sub-section (1) shall be liable to deduct Income tax under this section”. The above provision clearly shows that no deduction is required under the above provision, if the amount paid to the account of the contractor does not exceed ₹ 30,000/-. The proviso to this section provides that where the aggregate of the amounts paid exceeds ₹ 75,000/-, such person shall be responsible to deduct TDS. In the present case, the assessee has not paid more than ₹ 30,000/- on one occasion because payment below ₹ 30,000/- each was paid on different occasions. The aggregate of the amount also does not exceeds in a year at ₹ 75,000/-. Therefore, assessee is not liable to deduct TDS u/s 194C(5) - Decided in favour of assessee Addition on account of lease rent income - Held that:- The assessee is paying is lease rental of ₹ 6,600/- to M/s HPCL. Therefore, the net impact of this entry is Revenue neutral. The authorities below have failed to understand these entries. The copies of the accounts are filed at pages 38 onwards in the PB. He has submitted that on similar facts no addition have been made in earlier year and subsequent year. In view of the above and considering the copy of the account of the assessee in the books of HPCL Ltd. it is clear that assessee was paying these lease rentals as well as receiving the same amount from HPCL as lease charges. The assessee, therefore, rightly contended that the net impact of this entry is Revenue neutral. Nothing is brought to my notice, if similar additions have been made in earlier year or subsequent year. Addition is, therefore, wholly unjustified.- Decided in favour of assessee
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2018 (11) TMI 473
Eligibility of deduction u/s 80IA - Buffer agency granting work contract of local bodies on behalf of the Government of Gujarat and not as a developer of infrastructure facility – Held that:- As decided in GUJARAT URBAN DEVELOPMENT COMPANY LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2014 (9) TMI 82 - ITAT AHMEDABAD] the appellant is doing the work of a concern engaged in work which is in the nature of a works contact awarded by any person (including the Central or State Government) and executed by it - As per the amended Explanation below section 80IA(13) with retrospective effect from 1.4.2000; the work should not be of the nature (emphasis supplied) of contract and not only contract. Here the project costs and source thereof not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services; it clearly is falling in the excluded category as per the amended Explanation below section 80IA(13); and therefore, not eligible for deduction. - Decided against assessee.
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2018 (11) TMI 472
Addition of closing stock - Shortage of closing stock - AO multiplied the shortage with average value of the stock available with the assessee in the closing stock and worked out addition in both the years - Held that:- Explanation of the assessee is plausible because on account of different weigh-bridges, possibility of different measurements in weight could not be ruled out. However, the assessee has been showing the loss consistently in the same ratio on similar products In the asstt.Year 2009-10, it has made purchases of 9990.716 MTs. In the next year it has made purchases of 10995.363 MTs. and in both the years, the loss claimed at 17.393/17.130 MTs. It creates a suspicion of being adopted a particular modus operandi by the assessee to inflate purchases and manipulate value of closing stock, but again we do not have any supporting evidence qua this suspicion. Therefore, looking to the facts and circumstances, we are of the view that an adhoc disallowance to the extent of ₹ 2,00,000/- in each assessment year is being sustained, then it can take care of any such steps at the end of the assessee. Accordingly, addition is restricted to ₹ 2,00,000/- (Rupees Two Lakhs only) to each assessment year and the balance in both the years is deleted. Ground of appeal of the assessee in both the years is partly allowed.
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2018 (11) TMI 471
Acceptance of book result - unexplained cash deposits - Held that:- A.O. in his remand report, acknowledged, that all details regarding cash deposits has been produced along with complete books of accounts and other supporting details. A.O. in remand proceedings, was satisfied of assessee having maintained its books of account, which has been examined by Ld. AO. Thus it is on these premises that Ld. CIT (A) held that section-145 (3) could not have been invoked. We are in agreement with the findings of Ld.CIT(A). On perusal of remand report admittedly Ld.A.O. is accepting the books of accounts filed by assessee. It is also been submitted that all details regarding the amounts have been verified and is also reflected. Thus we do not find any reason to deviate from observations of Ld. CIT (A). - decided against revenue. Addition of cash credits made in hands of assessee - Held that:- CIT(A) categorically observed that A.O. verified additional evidences filed by assessee and has gone through complete books of accounts and other relevant supporting details on this issue. It has also been recorded by Ld. AO in remand report, that these details reveals that assessee has received amount from some parties in cash, and which is reflected in books of accounts. He thus does not question/doubt genuineness of the deposits as it has been considered to be in the due course of discharging his obligations in carrying out business. Under such circumstances we do not find it appropriate to uphold addition made by Ld. AO. Ld.A.O. in turn is accepting the details filed by assessee and therefore we uphold the decision of Ld. CIT (A).- decided against revenue.
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2018 (11) TMI 470
Special allowance or benefit, not being in the nature of a perquisite - Exemption u/s 10(14) - expenditure incurred out of incentive bonus - claim rejected by the AO on the ground that it was not allowable under section 10(14) of the Act, since the assessee has assessed under the head “salary” - Held that:- It cannot be disputed that as a Development Officer of LIC, main task is to develop business for the LIC. For that, the DO has to undertake various functions. No details or supporting evidence has been furnished by the assessee before us to support its claim. Atleast the assessee should have filed a certificate from the LIC for determining expenses possibly to be incurred by him for the purpose of procuring LIC business and earning incentive bonus. No such certificate has been submitted and any details to support its case. Therefore, we remit this issue back to the file of the ld.AO to decide the claim of the assessee in view of the CBDT circular dated 19.12.1996 and decision of the Tribunal in the case of Shri Nitin T. Bhuptani [2018 (4) TMI 1610 - ITAT RAJKOT]. - Decided in favour of assessee for statistical purpose.
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2018 (11) TMI 469
Levy of penalty u/s 271(1)(c) - unexplained investment in construction of house - recording of satisfaction - opinion of the registered valuer is not accepted - Held that:- The notice initiating the penalty proceedings is uncertain where he uses the expression “concealment particulars of income or furnished inaccurate particulars of income”. As during the penalty proceedings, he has given a decisive finding as reflected in the penalty order that the assessee is guilty of 'concealment of particulars of income' by not disclosing the investment in the construction of his house. As held in case of HPCL Mittal Energy vs Add. CIT [2018 (8) TMI 507 - ITAT AMRITSAR] the uncertain charge at the time of initiation of penalty has been made good and substituted with a conclusive default at the time of passing the penalty order and that in such a case, no fault can be found in the penalty order.” In such a case, we donot see any infirmity in the penalty order so passed by the Assessing officer and the contentions so raised by the AR in this regard are not accepted. Minor differences in estimation and consequent valuation are but natural and so long as fundamental methodology so adopted by the valuation officer are not disputed, such minor differences in valuation cannot form the basis for levy of penalty as held by various Courts including the Hon’ble Supreme Court in case of Dilip N. Shroff (2007 (5) TMI 198 - SUPREME COURT) wherein it was held that only because the opinion of registered valuer is not accepted or some other expert gives another opinion, is not by itself sufficient for arriving at a conclusion that the assessee had furnished inaccurate particulars attracting penalty u/s 271(1)(c). In light of the same, the penalty so levied u/s 271(1)(c) of the Act is hereby directed to be deleted in hands of Sh. Sapan Jain. - decided in favour of assessee.
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2018 (11) TMI 468
Validity of reopening of assessment - Employee Stock Option Scheme (ESOP) expenditure - related to business activity of the assessee or not - whether new and fresh material available with the A.O to form a belief that the income of the assessee chargeable to tax had escaped assessment - Held that:- We are persuaded to subscribe to the claim of the assessee, that the very basis on which the case of the assessee had been reopened viz. that in order to get deduction of ESOP expense, the shares should have been first purchased by the assessee company and subsequently transferred to its employees, is devoid of the necessary sanction of law. As per Sec. 42(1) of the Companies Act, 1956 (as was then available on the statute), except for under certain cases provided in the said section, a body corporate cannot be a member of a company which is its holding company, and any allotment or transfer of shares in a company to its subsidiary shall be void. The only two exceptions to the aforesaid mandate are carved out in sub-section (2) of Sec. 42 viz. (a) where the subsidiary is concerned as the legal representative of a deceased member of the holding company; or (b) where the subsidiary is concerned as trustee, unless the holding company or subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of transaction entered into by it in the ordinary course of its business which includes the lending of money. We are of the considered view that as the purchase of the shares by the assessee company of its parent/holding company viz. M/s Kotak Mahindra Bank Ltd. as sought by the A.O, does not fall within the sweep of either of the exceptions carved out in Sec. 42(2) of the Companies Act, 1956, thus, it can safely be concluded that the same was barred as per the mandate of law. We thus, have no hesitation in observing that though the A.O had conveyed the reason for reopening the case of the assessee, but had withheld the very basis for so concluding. Rather, in our considered view, on the basis of our aforesaid deliberations, it can safely be concluded that as the ‘reasons to believe’ are not only vague, but are found to militate against the mandate of law, thus, the same cannot be approved and for the said reason too are liable to be struck down. We find substantial force in the contention of the Ld. A.R, that as on 13.03.2014 when the case of the assessee was reopened for the aforesaid reasons, there was an order of the jurisdictional Tribunal available before him in the case of M/s Accenture Services Pvt. Ltd. Vs. DCIT, Circle-3(1), Mumbai [2010 (3) TMI 1107 - ITAT MUMBAI] wherein in the backdrop of identical facts as are there before us in the case of the present assessee, the Tribunal had observed that ESOP expense incurred by the assessee company on account of payments made by it for the shares of parent/holding company allotted to its employees was allowable as a revenue expenditure. We find that the aforesaid order of the Tribunal was accepted by the revenue, and no further appeal was filed before the Hon’ble High Court of Bombay. In the backdrop of the aforesaid facts, we find ourselves to be in agreement with the contentions advanced by Mr. Irani, that it is beyond comprehension as to how the A.O on the basis of a view which clearly militated against the aforesaid order of the jurisdictional Tribunal, could have reopened the case of the assessee. - Decided in favour of assessee
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Customs
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2018 (11) TMI 467
Stay of impugned order - return of the amount deposited as pre-deposit - Held that:- Admission of an Appeal merely indicates that the question as urged gives rise to debatable issues. This by itself would not warrant a stay of the order dated 24th April 2017 passed by the Tribunal - No extra ordinary circumstances are pointed out which would justify depriving the Respondents, the fruit of its success before the Tribunal founded in the impugned order dated 24th April 2017. Notice of motion dismissed.
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2018 (11) TMI 466
Revocation of Custom Broker License - forfeiture of security deposit - it was alleged that the appellant had contravened provisions of Regulation 13(1), 13(d), 13(k), 13(o) and 20(i)(a), (b) (c) of the CHALR, 2004 - it appeared to the department that the appellant had given false affidavit and secured the Customs Broker Licence by suppression of facts and submissions of false documents in contravention of provisions of Regulations 5(d) and 5(e) of the CBLR 2013, thereby contravening provisions of Regulation 18(b) of the CBLR 2013. Held that:- The appellant is not required to fulfill under Regulation 5 of CBLR, 2014, inasmuch the appellant is not new applicant - Regulation 4, 5 and 7 is applicable to an applicant, who applies and undertakes examination conducted by Directorate General of Inspection of Customs Central Excise, by inviting application by publication of notice in two leading national daily newspapers in English and Hindi and, subsequently grants licence to successful applicant(s). The said affidavit has been filed in haste, as is evident from the fact that when Regulation 5 is not applicable to the appellant, there was no requirement to file any affidavit by the appellant. This gets further supported from the first letter dated 01.01.2017 filed by the appellant, to the department, wherein they have prayed to extend the validity of licence for five years i.e. for the period which was lost from the date of suspension i.e. 15.12.2010 till the date of original validity i.e. 15.12.2015. The license is restored - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 465
Rectification of mistake - while passing the final order this Tribunal has set-aside the impugned order and appeals were allowed which is factually incorrect as in this case majority decision is that the redemption fine and penalties were reduced 10% of the fine and penalties imposed by the original adjudicating authority in each case - Held that:- There is a mistake apparent on record while passing the final order by this Tribunal, therefore, the final order is rectified - ROM allowed.
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2018 (11) TMI 464
Scope of SCN - Classification of imported goods - Blankets - Revenue is of the view that the said blankets are classifiable under CTH 60019200, whereas respondent classified the same under CTH 63014000 - Held that:- While classifying the same under chapter Heading 63014000, the Ld. Commissioner has relied on Section Note 7(g) of Section Xi of Customs Tariff Act, whereas, the said observations have not been challenged by the Revenue in appeal and the Revenue is relying heavily on Section Note 7(a) and (b) or Section Xi - Without challenging the observations of the ld. Commissioner, the appeal filed by the Revenue is not sustainable - appeal dismissed - decided against Revenue.
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Service Tax
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2018 (11) TMI 463
CENVAT Credit - trading activity or not? - credit availed on purchase of the devices viz., “CR-200B device”, which was not used for providing any output service but used only for trading purposes - Held that:- The arguments of the learned counsel for the appellants that the devices were transferred to the customers on hire/free of cost is not tenable in law because the appellants have issued the invoice on which they have paid VAT under the Karnataka VAT Act - further, the assessee has not maintained the proper record of inventory used and inventory traded - the appellant has also not been able to provide documentary evidence to show CR-200B devices in question have been used to provide output service to their clients - credit cannot be allowed. Penalty u/s 78 - Held that:- There was ambiguity in the issue and it relates to interpretation of law - also, the appellants have provided all the information to the audit party and the matter came to the light during the audit only from the records submitted by the appellant wherein they have disclosed the availment of CENVAT credit there - penalty not warranted. Appeal allowed in part.
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2018 (11) TMI 462
Residential Complex Service - Date of effectiveness of the service w.e.f. 01.07.2012 - negative list of services - benefit of abatement under N/N. 26/2012-ST. - Held that:- The CBEC's letter issued by TRU dated 26.02.2010 about the scope of valuation in respect of Residential Complex Service which was introduced in the year 2010, during such period when there was no provision of Section 66F dealing with bundled service on the statute. After the introduction of Section 66F on the statute, the provisions of Section 66F will prevail over any clarification or view taken by CBEC. Benefit of abatement under N/N. 26/2012-ST. - Held that:- The components such as preferred location charges, external development charges etc. are part and parcel and for various elements of the main service which is Residential Complex Service and therefore the entire consideration received by the appellants are eligible for abatement under said N/N. 26/2012-ST. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 461
Online Information and Data base Access & Retrieval service - agreement with M/s. Globe Centre, a division of Nestle Australia to share expenses towards establishing and maintaining a SAP software system providing standardized information infrastructure - reverse charge mechanism - Held that:- The appellant had agreed to install the Globe Template in a common computer system and the appellant had been granted access to the computer system for its use. The appellant can only access its own data and the data and information on the computer system belongs to the appellant and is neither owned nor provided by Globe Center. In that circumstance, the services in question do not qualify as “online Information and data base access and retrieval service” - the appellant is not liable to pay service tax under reverse charge mechanism. Manpower Recruitment or supply Agency service - expenses in foreign exchange largely in relation to bonus, medical expenses and school fees, for employees of other Nestle Affiliates - Held that:- The appellant is not Manpower Recruitment or supply Agency and the amount paid to the affiliates for the benefit of the appellant’s own employees, is not to be treated as consideration towards providing manpower recruitment and supply agency service - Admittedly, appellant is not Manpower Recruitment or supply Agency, therefore, the appellant is not liable to pay service tax under reverse charge mechanism. Technical testing service - testing for sample dispatched of its product and raw materials to laboratories located outside India for analysis and testing making report available to the appellant - demand pertains to the period 1.1.2005 to 17.4.2006 - Held that:- Hon’ble Bombay High Court in the case of Indian National Ship-owners Association vs. Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT] which has been affirmed by the Hon’ble Supreme Court reported in 2010 (17) STR J57 (SC) has observed that prior to 18.4.2006, no service tax is payable by the recipient located in India on the service received from abroad under reverse charge mechanism - As the period pertains prior to 18.4.2006, therefore the demand is not sustainable. Commercial Training or Coaching service - appellant received books from M/s. Competitive Dynamics and SGV Development - amounts were remitted abroad towards training of employees outside India - Held that:- Mere supply of reading material cannot be equated to postal coaching. Further training services for employees were rendered outside India and not taxable as import of service. Services, if any, having been performed outside India, cannot be taxed in India in view of the decision of this Tribunal in the case of Cerebral Learning Solutions Pvt.Ltd. [2013 (4) TMI 527 - CESTAT NEW DELHI] - appellant is not liable to pay service tax the category of Commercial Training or Coaching service. Online Information and Data base Access & Retrieval service paid for internet charges - appellant has availed leased line services from Equant Network Services Ltd, a global network connectivity provider to communicate with Nestle Environment and outside - Held that:- The services provided to the appellant is only for connectivity between two places and therefore, in the absence of provision of data or information, internet charges cannot be liable to tax under the category of Online Information and Data base Access & Retrieval service - demand set aside. Club or association service - period 16.6.2005 to 17.4.2006 - Held that:- Prior to 18.4.2006 any service received from outside India is not taxable under the reverse charge mechanism in view of the decision of the Hon’ble Bombay High Court in the case of Indian National Ship-owners Association - demand not sustainable. Advertising and advertising agency - period 1.1.2005 to 17.4.2006 - reverse charge mechanism - Held that:- The demand has been confirmed for the period 1.1.2005 to 17.4.2006 under the reverse charge mechanism prior to 18.4.2006, therefore, the said demand is not sustainable against the appellant in view of the decision of the Hon’ble Bombay High Court in the case of Indian National Ship-owners Association. Software maintenance - period 1.1.2005 to 31.12.2007 - Held that:- The appellant has procured software packages for its accounts department, human resource, enterprise resource planning, maintaining consumer complaint and licence of Microsoft Software and incurred expenses for use and their maintenance. As per circular No.70/19/2003 dt.17.12.2003, maintenance of software cannot be taxable to service tax as repair and maintenance as software is not goods. Software is a part of computer system and would therefore be covered by the circular. Therefore, any service rendered outside India is not taxable in India - demand not sustainable. Mnagement consultancy service - period 1.1.2005 to 10.5.2007 - Held that:- The appellant has incurred expenses to students of Switzerland who undertake studies on how to improve the productivity of milk and come for training and provide advice to mil farmers. The said activity of providing assistance or advice in respect of technical aspects of production would not be covered under the definition of „management consultant. Similarly, these students are not managing the appellant’s organizaiton as they have to do nothing with management of organization. In that circumstance, no service tax is payable under management consultancy service - demand not sustainable. Consultancy engineer services - period 1.1.2005 to 31.12.2008 - Held that:- The expenses incurred towards licence renewal of job evaluation system to reward technologies Pty Limited and for spares paid to Gambo B.V. which cannot be categorized under consultancy engineer services, no service tax is payable by the appellant - demand set aside. Misc. expenses for the period 1.1.2005 to 31.12.2008 - appellant has incurred miscellaneous expenses in convertible foreign exchange which includes legal charges, courier charges, import of product samples, book, charges for damages goods exported, entertainment expenses abroad, membership fees, etc. - Held that:- The show cause notice has not indicated the specific category of taxable services under which the said amount is taxable. In that circumstance, no service tax is payable by the appellant. Moreover, the services provided outside India and for the services rendered outside India no service tax is payable in India - demand not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 453
Time limitation for filing appeal - Demand of Interest on the late payment of service tax - Held that:- The Commissioner (Appeal), in the impugned order has not considered the aspect of limitation as demand is raised for the period from 2009 to 2012, vide the impugned Show Cause Notice on 29/1/2017 - the demand is well beyond the period of time limit prescribed under Section 73(1) of the Finance Act, 1994 - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (11) TMI 460
CENVAT Credit - input services - outward transportation of goods upto the buyer’s premises - Held that:- The issue has attained finality as per the decision of the Hon’ble Supreme Court in the case of Ultratech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT OF INDIA], where it was held that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer’s premises was not admissible - credit not allowed. Penalty - Held that:- There were several litigations pending before various High Courts and that the matter had reached the Hon’ble Supreme Court and being an interpretational, the penalty is unjustified. Appeal allowed in part.
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2018 (11) TMI 459
Demand of Interest - delay in payment of duty - delay for the reason that the agreement as well as the certificates issued by the TNEB for the clearance of poles, agreed upon by both sides, indicates the central excise duty - Held that:- The taxable event in the case of central excise duty is the clearance of goods. Therefore, even though the agreement or TNEB certificate included the central excise duty, the liability to pay the duty arises only at the time of clearance of goods / poles - demand of Interest is unsustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 458
Refund of excess Excise Duty paid - refund rejected on the ground of time limitation and unjust enrichment - Held that:- The appellants are having a local standi to file the refund claim as held by the Commissioner (A) against which the Department has not filed any appeal. Unjust enrichment - Held that:- The appellants have produced the balance sheet as well as the certificate of the Chartered Accountant showing that the incidence of excise duty has not been passed on to the buyer or any other person and the same is shown as receivable in the books of accounts but these documents have not been considered by the authorities below. The original authority has wrongly rejected the refund claim on time bar by holding that the claim has been filed beyond the period of one year from the relevant date i.e. purchase date whereas the original authority should have considered the limitation of one year from the date of finalization of the assessment as provided in Rule 7 of Central Excise Rules, 2002 but the same has not been done by the original authority - the case needs reconsideration - Further, the original authority will also consider the issue of limitation of one year which will start from the date of finalization of the assessment and not from the date of purchase made by the appellant. Appeal disposed off by way of remand.
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2018 (11) TMI 457
Penalty u/r 15 of CENVAT Credit Rules and 27 of Central Excise Rules 2002 - CENVAT Credit - inclusion of cylinder charges in assessable value - Held that:- The Commissioner (A) has observed that the appellant has declared the stock of inputs and the RO had caused necessary verification after the assessee cross the exemption limit, the allegation that the credit is irregular cannot be sustained - Once the allegation of irregular credit is not sustained then the confirmation of duty is not tenable in law. Further, the appellants have maintained proper records which were shown to the Department and all the questions of the Department were answered by the appellant with documentary evidence of the records - credit rightly availed. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 456
100% EOU - Valuation - deemed exports or not - inclusion of sales tax, insurance and freight in assessable value - benefit of N/N. 2/95-CE dated 04.01.1995 - Held that:- The facts are not in dispute; the appellant is a 100% EOU and excise duty is chargeable on products manufactured in 100% EOU in terms of proviso to Sec. 3 (1) of the Central Excise Act at the rates equal to custom duties leviable on similar products if they are imported into India. However, when the goods manufactured by them are exported, Exemption Notification No. 125/84 fully exempts the goods from payment of excise duty. The clearances in question are under this Para being supplies effected in DTA against payment in foreign exchange. It is also not in dispute that the appellant had obtained necessary permission for such clearances. These clearances are, however, not covered by either notification. As a creation of law, the Tribunal cannot go beyond the scope of the law itself nor modify it. Exemption under N/N. 2/95-CE - Held that:- Hon’ble Supreme Court of India has in the case of Virlon Textile Mills Ltd [2007 (4) TMI 6 - SUPREME COURT OF INDIA] held that this exemption notification will be applicable even when the goods are exported against foreign exchange to DTA - the appellant is entitled to the benefit of Exemption Notification No. 2/95-CE dated 04.01.1995. Appeal disposed off.
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2018 (11) TMI 455
Pipes needed for delivery of water from its source to the plant and from there to the storage facility - benefit of N/N. 3/04 dated 08.01.2004 - the notification required the existence of water supply plant and storage facility neither of which were present in the particular project - Held that:- It is evident from the certificate issued by the District Collector that it is a lift irrigation facility of the Government of Andhra Pradesh which involved pumping of water. The certificate further certifies that the pipes in question are required for delivery of water from plant to the delivery cistern - There is nothing in the notification to suggest that the storage facility has to be of any particular size. There is also nothing in the notification which suggests that water supply plant should necessarily have some processing facility such as for desalination, purification, etc. In this case, the plant is certainly a plant for pumping water. The certificate issued by the District Collector clarifies that the pipes are required for taking the water from the plant to the cistern and therefore, the pipes in question are squarely covered by the Exemption Notification No. 3/2004-CE dated 08.01.2004. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 454
Clandestine removal - demand based on comparison of figures as reflected by the appellant in their ER-I return and their sales register - Held that:- The appellant’s explanation is that the sales register also shows the clearances of inputs “as such” and all the entries in the sales register do not relates to clearance of their final product and draws our attention to various documentary evidences in support of their plea - such documentary evidences cannot be examined and verified at the Tribunal level and inasmuch as the same relates to factual position are required to be examined by the Original adjudicating authority, for which purpose matter is remanded. Demand to the tune of ₹ 2,52,362/- is based upon the fact that a quantity of 62.600 M.T. of MS Ingots which stands recorded in RG-I Register has been removed by the appellant without issuance of any invoice - Held that:- Appellant submits that all the said facts were reflected in their RG – I Register and they have documentary evidences to prove recycling of the Ingots. Inasmuch as, the said fact also relates to examination and verification of the factual position, the said issue is remanded to the adjudicating authority. Denial of CENVAT Credit on the DG Set, which was not found to be present in the assessees factory - Held that:- Though the Lower Authorities have accepted the fact that the said DG Set has subsequently paid the duty but the issue relates to imposition of penalty inasmuch as it is the Revenues case that duty was paid on DG Set only after being pointed out by the Audit team. Inasmuch as, we have remanded the earlier two issues, the adjudicating authority would also deal with the said aspect. Appeal allowed by way of remand.
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2018 (11) TMI 452
SSI Exemption - goods were cleared in the name of fictitious firms - Held that:- The Tribunal in M/S SWAMI PACKAGERS PVT. LTD., SHRI DEO PRAKASH RUNGTA, DIRECTOR VERSUS CCEX, PATNA [2018 (11) TMI 284 - CESTAT KOLKATA], set aside the impugned final order and remanded the matter to the adjudicating authority for re-quantification of the demand against M/s Swamy Packagers Pvt. Ltd. as well as Shri Deo Prakash Rungta, Director of the Appellant Company as also for redecision of the amount of penalty. The lower authorities is directed to decide the quantum of penalty, if any, against the present appellant also as part of the common proceeding - appeal allowed by way of remand.
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2018 (11) TMI 451
Cenvat Credit – input services - GTA service – procurement of fly ash and supply of cements - round trip transport - freight charges for both types of transports were availed by the assessee – Held that:- The respondent assessee is paying the service tax on the basis of rate fixed for per metric ton, which is to and fro from the cement factory to the Thermal Plant - Tribunal rightly relying on the decision in the case of C.C.E., Guntur [2010 (2) TMI 284 - CESTAT, BANGALORE] has set aside the demand and notice issued by the Department - credit allowed - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2018 (11) TMI 450
Sales Tax Practitioner cum Advocate - Disqualification u/s 81(2) of the Tax Act - allegation that appellant has committed misconduct - sole contention of petitioner is that such a notice could not have been issued to the petitioner when the petitioner was acting as a legal practitioner, having acquired a degree of LLB and being enrolled with the Bar Council of Gujarat on 10.08.1983. Held that:- Reading of Section 81 of the Act suggests that a person who is entitled or required to attend before any authority in connection with any proceedings under the Act can be of three categories namely (I) a person can be authorised in writing to appear before such authority (II) a Legal Practitioner or a Chartered Accountant or a Cost Accountant or (III) a Sales Tax Practitioner who possesses the prescribed qualification entered in the list. The term legal practitioner would include an advocate. Reading of Section 81(1) of the Act therefore makes it clear that an individual can appear before an authority in either of the capacities including one being a sales tax practitioner or a legal practitioner. The annexures to the show cause notice clearly suggest that the petitioner appeared before such authorities in the capacity of a legal practitioner and not as a sales tax practitioner. Sub-section 81(2) of the Act provides that whenever a legal practitioner or any other professional namely a Chartered Accountant or a Cost Accountant is found guilty of misconduct with any proceeding under the VAT Act, the authority empowered to take disciplinary action is the authority to which the members of the profession belong to. (emphasis supplied) Admittedly, the petitioner is a legal practitioner and therefore the domain to conduct any investigation or issue a show cause notice would be that of the State Bar Council. Section 35 of the Advocates Act 1961 clearly provides that it is the State Bar Council which has the power to take disciplinary proceedings for any professional and/or any other misconduct against an advocate - It is therefore evident that a sales tax practitioner and a legal practitioner are distinct individual professionals and it is in this context that a segregation is made in Section 81(1) of the Act authorising each individual to appear in his respective capacity. Therefore, if a legal practitioner is to be proceeded against for any misconduct under the proceedings under the VAT Act, sub-section (2) of Section 81 of the Act makes it clear that such disciplinary proceedings have to be taken by the authority to which the member of such profession belongs to. Once, the petitioner acquired the certificate of a legal practitioner by obtaining a licence on 10.08.1983, such a qualification supersedes the certificate of a sales tax practitioner and cloak of being a legal practitioner takes over and the petitioner loses his identity of a sales tax practitioner. The case therefore does not fall within clause (c) of sub-section (1) of Section 81 of the Act - the impugned show cause notice deserves to be quashed - petition allowed.
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