TMI Tax Updates - e-Newsletter
November 13, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. GST a monumental reform, hit growth only for 2 qtrs: FM

2. Consumer Price Index numbers on base 2012=100 for Rural, Urban and Combined for the Month of October 2018

3. Commerce Minister leads delegation for RCEP meet in Singapore

Notifications

GST - States

1. F.1-11(91)-TAX/GST/2018(Part-II) - dated 3-11-2018 - Tripura SGST

The Tripura State Goods and Services Tax (Thirteenth Amendment) Rules, 2018.

2. F.1-11(91)-TAX/GST/2018(Part-II) - dated 31-10-2018 - Tripura SGST

Seeks to supersede Notification No.F.1-11(91)-TAX/GST/2017(Part-VI), dated 22.09.2017.

3. F.1-11(91)-TAX/GST/2018(Part-I) - dated 31-10-2018 - Tripura SGST

Seeks to provide taxpayers whose registration has been cancelled on or before the 30th September, 2018 time to furnish final return in FORM GSTR-10 till 31st December, 2018.

4. KA.NI.-2-2030/XI-9(47)/17 - dated 22-10-2018 - Uttar Pradesh SGST

Set up by an Act of Parliament or a State Legislature with fifty-one percent or more participation by way of equity or control, to carry out any function.

5. KA.NI.-2-2029/XI-9(47)/17 - dated 22-10-2018 - Uttar Pradesh SGST

Appoint the the 1st day of October, 2018, as the date on which the provisions of section 52 of the said Act shall come into force.

6. KA.NI.-2-2028/XI-9(47)/17 - dated 22-10-2018 - Uttar Pradesh SGST

Services Exempted from Tax Clarifying the Scope and Applicability of the notification No. KA.NI.-2-843/XI-9(47)/17-U.P. Act.-1-2017-Order-(10)-2017 dated 30.06.2017.

7. KA.NI.-2-2027/XI-9(47)/17 - dated 22-10-2018 - Uttar Pradesh SGST

Notifies that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of half per cent of the net value of intra-State taxable supplies.

8. KA.NI.-2-2023/XI-9(42)/17 - dated 17-10-2018 - Uttar Pradesh SGST

The Uttar Pradesh Goods and Services Tax (Twenty Second Amendment) Rules, 2018

9. KA.NI.-2-1963/XI-9(42)/17 - dated 10-10-2018 - Uttar Pradesh SGST

The Uttar Pradesh Goods and Services Tax (Twenty One Amendment) Rules, 2018.

10. KA.NI.-2-1962/XI-9(42)/17 - dated 10-10-2018 - Uttar Pradesh SGST

The Uttar Pradesh Goods and Services Tax (Twentieth Amendment) Rules, 2018.

11. 1571-F.T. - dated 2-11-2018 - West Bengal SGST

Corrigendum to Notification No. 1035-F.T. dated 27.07.2018

12. 1570-F.T.-60/2018-State Tax - dated 2-11-2018 - West Bengal SGST

The West Bengal Goods and Services Tax (Thirteenth Amendment) Rules, 2018.

13. 26/2018-C.T./GST-59/2018-State Tax - dated 30-10-2018 - West Bengal SGST

Seeks to extends the time limit for furnishing the declaration in FORM GST ITC-04 for the period from July, 2017 to September, 2018 till 31st December, 2018.

14. 1540-F.T.-58/2018-State Tax - dated 30-10-2018 - West Bengal SGST

Seeks to provide taxpayers whose registration has been cancelled on or before the 30th September, 2018 time to furnish final return in FORM GSTR-10 till 31st December, 2018.

15. 1539-F.T.-57/2018-State Tax - dated 30-10-2018 - West Bengal SGST

Seeks to exempt the authorities incurring expenditure subject to post audit under Ministry of Defence from TDS compliance with retrospective effect from 1st October, 2018.

16. 1538-F.T.-56/2018-State Tax - dated 30-10-2018 - West Bengal SGST

Seeks to supersede Notification No. 1642-F.T., dated 15.09.2017 regarding handicraft goods.

Indian Laws

17. F. No. 13/20/2014-NS - G.S.R. 1091(E) - dated 5-11-2018 - Indian Law

Senior Citizens’ Welfare Fund (Amendment) Rules, 2018

Circulars / Instructions / Orders

GST - States

1. 17/2018-GST (State) - dated 2-11-2018

Circular to clarify the procedure in respect of return of time expired drugs and medicines.

2. 16/2018-GST (State) - dated 2-11-2018

Clarifications of issues under GST related to casual taxable person and recovery of excess Input Tax Credit distributed by an Input Service Distributor.

3. 15/2018-GST (State) - dated 2-11-2018

Clarifications on certain issues related to refund.

4. 14/2018-GST (State) - dated 2-11-2018

Processing of Applications for Cancellations of Registration submitted in FORM GST REG-16

Highlights / Catch Notes

Income Tax

• Section 68 Confirms Cash Credit Additions Due to Unexplained Transaction Peculiarities Over Two Years Involving Large Sums.

  Case-Laws - HC : Addition u/s 68 - cash credits - What was found peculiar, which fact remains unexplained, as to why and how should be their transactions, in cash, only in a particular month of the only two years. Such transactions are of huge amount - Additions confirmed.
  Visit to Get Source

  ---

• Taxpayer Qualifies for Section 54 LTCG Deduction: New Property Possession Within One Year of Original Property Sale.

  Case-Laws - AT : Deduction u/s 54 - LTCG - as the possession of the new residential property was delivered to the assessee within a period of one year prior to the transfer of the property under consideration, thus the purchase of the same could safely be held to have been substantially effected on the said date.
  Visit to Get Source

  ---

• Section 11 Exemption: Surplus Alone Doesn't Make Charitable Activities a Business Under Income Tax Act.

  Case-Laws - HC : Charitable activities - exemption u/s 11 - merely earning the surplus does not result in to the conclusion, that assessee is carrying on its activities, which can be termed as business, trade, or commerce.
  Visit to Get Source

  ---

• Tax Authorities Confirm Profit Additions on Grey Market Purchases; VAT Claims Deemed Bogus by CIT(A.

  Case-Laws - AT : Purchase of material in the grey market - the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases - Additions by the CIT(A) confirmed.
  Visit to Get Source

  ---

Customs

• Customs Department Delayed Over 5 Years in Issuing Show Cause Notice Despite Having Necessary Information.

  Case-Laws - HC : Time limitation of filing SCN - More than five years prior to issuance of show cause notice, even the representative samples had also been drawn and the test reports from the laboratory were received, but still the department thought it appropriate to sleep over the matter for five years.
  Visit to Get Source

  ---

• CHA Penalized for Failing to Verify KYC Details Before Clearing Rough Diamonds Consignment.

  Case-Laws - AT : Penalty on CHA - There was a serious lapse on part of the CHA in verifying the KYC before taking up the Custom clearance of consignment of rough diamond - levy of penalty confirmed.
  Visit to Get Source

  ---

• Authority Upholds Valuation of Imported Hydraulic Pumps Based on Subsequent Imports by Related Entity; No Grounds for Rejection Found.

  Case-Laws - AT : Valuation of imported goods - hydraulic pump - adjudicating authority has adopted value which coincides with the price declared in the imports effected by the group concern subsequent to the import of the impugned goods - there are no reasons to discard the enhanced value.
  Visit to Get Source

  ---

Service Tax

• Service Providers Evading Tax Face Extended Recovery Period Under Finance Act's Section 73 Proviso.

  Case-Laws - AT : Extended period of limitation - When any service provider fails to comply with the provisions of the Finance Act, which make him liable to pay the service tax, the only conclusion drawn is that the same act is with an intent to evade duty - the Department was entitled to invoke the proviso of Section 73 of the Act
  Visit to Get Source

  ---

Central Excise

• Right to Be Heard: Ensuring Fairness by Addressing the Exact Issue in Adjudication Process.

  Case-Laws - HC : Principles of Natural Justice - A person may be represented before an adjudicating authority on a particular issue but the adjudicating authority may render a decision on a completely different issue. The mere presence or representation in such an event does not cure the breach.
  Visit to Get Source

  ---

• CENVAT Credit: Broad Definition of Inputs Allows Wide Range of Goods Eligibility for Credit in Factory Use.

  Case-Laws - AT : CENVAT Credit - The definition of inputs that the goods brought within the factory used for any purpose would be eligible for Credit. Thus, the definition of inputs has a wide ambit so as to cover all goods which have been brought into the factory - credit allowed.
  Visit to Get Source

  ---

• Penalty Dropped Due to Late Clarity on CENVAT Credit Ineligibility After Rule 6(3) Explanation III Addition.

  Case-Laws - AT : CENVAT credit - levy of penalty - it was only with the insertion of Explanation III in rule 6(3) of CENVAT Credit Rules, 2004 that the ineligibility became unambiguously clear - penalty not warranted.
  Visit to Get Source

  ---

• Penalty Confirmed for M/s Royal Synthetics Due to Clandestine Goods Removal under Central Excise Laws.

  Case-Laws - AT : Clandestine removal - penalty - The unquestioned documentary evidence would suffice to establish the clandestine removal and the handling of such goods by M/s Royal Synthetics - Levy of penalty confirmed.
  Visit to Get Source

  ---

• CENVAT Credit Dispute: No Pro Rata Input Service Distribution Required Before Rule 7 Amendment.

  Case-Laws - AT : CENVAT Credit - input service distribution - before amendment in rule 7, there was nothing in the statute requiring pro rata distribution.
  Visit to Get Source

  ---

Case Laws:

• GST

• 2018 (11) TMI 518
  Detention of goods with vehicle - it is alleged that e-way bill shows the place as Palakkad instead of Alappuzha - Held that:- An identical issue decided in the case of RENJI LAL DAMODARAN, DAMU SONS SALES CORPORATION VERSUS STATE TAX OFFICER, KOTTARAKKARA AND ASST. STATE TAX OFFICER, KARUNAGAPALLY [2018 (8) TMI 1145 - KERALA HIGH COURT], where it was held that It is directed to release the goods on the appellant 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. The respondent authorities are directed to release the petitioner s goods and vehicle on his 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.

  ---

• 2018 (11) TMI 517
  Detention of goods with vehicle - it is alleged that the consignment note does not contain the details of the vehicle used for the transport - Held that:- An identical issue decided in the case of RENJI LAL DAMODARAN, DAMU SONS SALES CORPORATION VERSUS STATE TAX OFFICER, KOTTARAKKARA AND ASST. STATE TAX OFFICER, KARUNAGAPALLY[ 2018 (8) TMI 1145 - KERALA HIGH COURT] , where it was held that It is directed to release the goods on the appellant 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. The respondent authorities to release the petitioner s goods and vehicle on his 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.

  ---

• Income Tax

• 2018 (11) TMI 515
  Addition u/s 68 - failure to discharge burden of proof in proving the cash credits - whether the explanation furnished in the opinion of the Assessing Officer is satisfactory or not? - Held that:- The authorities below found the explanation furnished by the assessee not to be satisfactory. What was found peculiar, which fact remains unexplained, as to why and how should be their transactions, in cash, only in a particular month of the only two years. Such transactions are of huge amount. Assuming that they were sold across the counter on test market basis, even then such sales ought to have been spread throughout the year. It is not the case of the assessee that the product was manufactured or sold for seasonal consumption or that such sales could have been affected only in the particular months of the respective years. The satisfaction of the officer no doubt has to be based on the material so placed by the parties, which in the instant case is there. Formation of opinion has to be after accounting for all the factors and that too on objective consideration of which we have no doubt - Decided against assessee.

  ---

• 2018 (11) TMI 514
  Pre-deposit - requirement to pay 20% of the demand as precondition - stay petition - Held that:- As Counsel agrees that the petitioner did deposit over 33%. In the light of the Ext.P9 departmental instructions requiring the appellant to pay 20% of the demand as precondition, reckon the Ext.P10 cannot be sustained. Accordingly, set it aside. The appellate authority will decide the petitioner's appeal on merits, expeditiously.

  ---

• 2018 (11) TMI 513
  Addition of unexplained cash deposits in the bank account - assessee was holding two separate accounts - whether the additions made by Ld.CIT(A) are of the transactions independent in nature or whether they are the same transactions on which Assessing Officer made the addition? - Held that:- The assessee has two bank accounts, one in the name of company and another in her personal name. AO noticed the cash deposits in the account maintained on behalf of the company and failed to notice the cash deposits in the personal account. But according to AR, this was disclosed before the Assessing Officer and Assessing Officer has accepted it after verification. We observe, Assessing Officer has not discussed anything in his order about the existence of second account in ICICI bank. Assessing Officer has verified only two bank accounts viz., Karur Vysya Bank and ICICI Bank. There was no discussion about second account with ICICI Bank. In our view, the second account was not brought to the notice of the Assessing Officer. However, this is irrelevant at this point of time. Whether this transaction is independent or same transaction of deposits in bank account. In our view, it is one transaction. The deposits in the bank account which belongs to the company account irrelevant to the assessee but the deposits in the personal account of assessee is relevant for this assessment and the Assessing Officer intended to make addition in her personal bank account and the same was made by the Ld.CIT(A). Therefore, this addition is nothing but coming out of same addition and not independent. - Decided against assessee.

  ---

• 2018 (11) TMI 512
  Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that:- On perusal of the show cause notices issued by the Assessing Officer u/s 274 r.w.s. 271 of the IT Act, 1961, dated 30/11/2010, which is placed on record, it is seen that the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down by the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows [2016 (8) TMI 1145 - SUPREME COURT], the notice issued by the Assessing Officer is not valid - Decided in favour of assessee.

  ---

• 2018 (11) TMI 511
  Eligibility towards claim of deduction u/s 54 - new residential property purchased by the assessee beyond the stipulated period of one year before the transfer of the property under consideration - claim of deduction was declined by the A.O, for the reason that the ‘agreement to purchase’ the new residential property entered into by the assessee on 29.01.2009 fell beyond the period of one year prior to the date on which the property under consideration had been transferred - Held that:- Admittedly, though the assessee had entered into an agreement to purchase the new property viz. A-801, Lodha Luxuria on 29.01.2009, but then the possession of the same was delivered to her only as on 18.05.2012. We are persuaded to subscribe to the claim of the ld. A.R that the purchase of new residential property would be substantially effected on the date when the assessee had paid the full consideration on the flat becoming ready for occupation and had obtained possession of the same. In the backdrop of our aforesaid observations, we are of the considered view that as the possession of the new residential property was delivered to the assessee on 18.05.2012 i.e. within a period of one year prior to the transfer of the property under consideration, thus the purchase of the same could safely be held to have been substantially effected on the said date. As relying on COMMISSIONER OF INCOME-TAX VERSUS SMT. BEENA K. JAIN [1993 (11) TMI 7 - BOMBAY HIGH COURT] the date of final occupation of the new residential property under consideration i.e 18.05.2012 shall be taken as the date of acquisition of the same by the assessee for the purpose of determining her eligibility towards claim of deduction under Sec. 54 of the Act.

  ---

• 2018 (11) TMI 510
  Unexplained investment - Held that:- CIT(A) perused the bank statements filed by assessee and was in agreement with the grievance raised by assessee of there being double addition as the source of sum of the investments were out of withdrawals from the same bank which was already added as unexplained cash under section 68 of the Act. Assessee explained source of cash deposit, amounting to Rs. 68,63,000/-, which has been dealt with by Ld.CIT(A) - Decided in favour of assessee.

  ---

• 2018 (11) TMI 509
  Charitable activities - exemption u/s 11 and 12 denied - Held that:- As in assessee’s own case for immediately preceding assessment years [2018 (1) TMI 189 - ITAT DELHI] held assessee is engaged in research based activity which is highly cost intensive and requires continuous spending on the innovation and new developments as it is concerning with the education of the society. The Assessee has categorically stated before the Id AO as well as before Ld CIT (A) that it is charging subscription as well as consultancy fees on actual, which fact is not denied. Therefore merely earning the surplus does not result in to the conclusion, that assessee is carrying on its activities, which can be termed as business, trade, or commerce. - Decided in favour of assessee

  ---

• 2018 (11) TMI 508
  Disallowance of excess depreciation on vehicle used on hire - substantiate the claim - Held that:- We found that the assessee could not substantiate that the vehicle was used for the purpose of hire either before the AO or before the CIT(A). Therefore, we found that the CIT(A) after considering the factual aspects has confirmed the addition which we are not inclined to interfere and uphold the same. This ground of appeal of the assessee is dismissed. Disallowance on account of late payment of EPF and ESI contribution - due date of filing of the return u/s.139(1) - addition made on the ground that the employees’ contribution to EPF & ESI were not deposited within the time prescribed under the P.F.Act. - Held that:- We find that no disallowance can be made for deduction of the same u/s.36(1)(va) r.w.s.2(24)(x) of the Act in view of the decision of Hon’ble Supreme Court in the case of Rajasthan State Beverages Corporation Ltd. [2017 (7) TMI 1087 - SUPREME COURT OF INDIA]. We find in the instant case, it is not in dispute that the contribution to EPF and ESI was deposited by the assessee before due date of filing the return of income u/s.139(1) of the Act. - Decided in favour of assessee

  ---

• 2018 (11) TMI 507
  Disallowance of royalty paid - Held that:- Facts in the case of Southern Switch gear Ltd. [1997 (12) TMI 105 - SUPREME COURT] (relied upon by the AO in his order) in which there was a collaboration agreement with a foreign company and payments were made on lump sum basis in five equal installments. We find that on exactly similar issue the predecessor of the Ld. CIT(A) in the assessment year 2008-09 has allowed the payment of royalty to the assessee and this decision of the Ld. CIT(A) was upheld by the Tribunal [2016 (2) TMI 84 - ITAT DELHI] - DR could not controvert this factual position - addition towards royalty payment to be deleted - decided in favour of assessee.

  ---

• 2018 (11) TMI 506
  Unexplained deposits made in the bank accounts of the assessee with HDFC and Kotak Mahindra Bank - claim of the assessee of having redeposited cash from the withdrawals - amount claimed to be received by the assessee from his mother-in-law for payment of the air ticket and hotel booking - Held that:- As mentioned by Ld. CIT(A) in his impugned order, the mother-in-law of the assessee was doing her independent business and was having her own bank account and the alleged payment was made by her to the assessee almost one year after the journey performed. On the same ground, the claim of the assessee of having received a sum of Rs. 49,000/- from his wife for payment of credit cards expenses was not found acceptable by the authorities below. Keeping in view these cogent and convincing reasons given by the authorities below, we are of the view that the source of deposits found to be made in his bank account with HDFC Bank as explained by the assessee to the extent of Rs. 3,06,150/- was rightly rejected by the authorities below. In that view of the matter, we find no justifiable reason to interfere with the impugned order of Ld. CIT(A) confirming the addition made by the AO on this issue and dismiss Ground No.2 of the assessee’s appeal. Deposits found to be made in the bank account of the assessee with Kotak Mahindra Bank -there is no evidence whatsoever brought on record before us in the form of relevant purchase bills, confirmations of the parties etc. to support and substantiate the contention of the Ld. Counsel for the assessee that the said cheques were issued against purchases of the business of the assessee’s wife. Moreover, such cheques claimed to be issued against purchases are very few and the debits appearing in the said bank account appear to be towards personal expenses such as credit cards expenses, club expenses, telephone expenses, schools fee etc. It is also noted that payments are frequently made from the said accounts to one party namely Media Content & Communication Services (India) Pvt. Ltd. for which no explanation whatsoever is offered on behalf of the assessee - no infirmity in the impugned order of Ld.CIT(A) confirming the addition - Decided against assessee.

  ---

• 2018 (11) TMI 505
  Addition towards the value of closing stock of land - value of closing stock of land determined by the Ld.AO at Rs. 53,03,690/-, which was not disclosed by the assessee in her return of income - Held that:- When the assessee had incurred expenditure towards development of the land, definitely it is only with a view for bringing the land to marketable conditions. However we find that the Ld.Revenue Authorities had estimated the value of the land at Rs. 345 per sq.ft., being the sale price of the land sold in the earlier instance and also included the development cost of Rs. 153.41 per sq.ft.. No merit in the same. The sale value of the land will fluctuate from one plot to another due to various reasons. Therefore the earlier sale value of the land cannot be taken as a decisive factor to estimate the value of land that remains to be sold viz., the closing stock of land. Further when the development cost is also added to the earlier sale price of the land then the value of land becomes inflated. According to prudent accounting principles which is generally accepted is to value the closing stock at cost or market price whichever is less. In this situation, in the case of the assessee, it would be appropriate to value the closing stock of land based on the market value determined by the State Government Authorities in the Revenue records. Hence we hereby direct the AO to value the closing stock of land as per the market value stated in the Revenue records of the State Government Authorities or the actual cost of the land including development charges whichever is less.

  ---

• 2018 (11) TMI 504
  Validity of reassessment proceedings - purchase of material in the grey market - receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills - Held that:- The original return was processed u/s 143(1) and therefore, the only requirement to initiate the reassessment proceedings was that AO had reasons to believe that certain income escaped assessment. The tangible material came in the possession of AO in the shape of information from Sales Tax Authority which suggested escapement of income. Therefore, the proceedings were validly initiated and we concur with the stand of lower authority in this regard. This ground of assessee’s appeal stand dismissed. So far as the merits concerned, there could be no sale without purchase of material since the assessee was engaged in trading activities. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee was in possession of primary purchases documents. At the same time, the assessee could not conclusively substantiate the delivery of material and failed to produce any of the party to confirm the transactions. Notices issued u/s 133(6) elicited no satisfactory response. All these factors cast a serious doubt on assessee’s claim. Therefore, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done. - Decided against assessee.

  ---

• 2018 (11) TMI 503
  Bogus purchases - computation of income - estimating 12.5% as profit on bogus purchases - assessee engaged in the business of trading in timber and plywood - AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties - Held that:- CIT(A) has applied the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. timber and Plywood in which the profit rate is low. Thus in full agreement with the argument of the learned Counsel for the assessee and according to me a profit rate of 8% will meet the end of justice in view of the decision of CIT vs. Smith P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] as the assessee has also paid the VAT element on these bogus purchases. On this account, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, direct the AO to recompute the income after applying profit rate at the rate of 8% and computer the income accordingly. Assessee's appeal partly allowed.

  ---

• Customs

• 2018 (11) TMI 502
  Time limitation of filing SCN - finalization of provisionally assessed Bills of Entry - report of the laboratory was received on 20.1.2012, whereas the show cause notice for assessment has been issued for 25.1.2017 - Final assessment on the basis of test reports received - Held that:- It is evident from the record that import of goods in the present case was made by the petitioner more than five years prior to the issuance of notice and provisional assessment. More than five years prior to issuance of show cause notice, even the representative samples had also been drawn and the test reports from the laboratory were received, but still the department thought it appropriate to sleep over the matter for five years. Issue as to what should be the reasonable time in the absence of statutory period prescribed in the Act for taking any action was considered by Hon ble the Supreme Court in State of Punjab vs Bhatinda District Co-op. Milk P. Union Limited [2007 (10) TMI 300 - SUPREME COURT OF INDIA], wherein it was opined that five years would be the reasonable period in the absence of any time prescribed in the Act. The proceedings initiated by the respondents for framing of assessment are set aside - petition allowed.

  ---

• 2018 (11) TMI 501
  Penalty on CHA u/s 114AA of Customs Act, 1962 - it was alleged that appellant was involved in the case of overvaluation of imported goods - It was also alleged that the CHA/Director failed to verify the KYC norms under the CHALR, 2004 - scope of SCN - Held that:- The SCN has been issued under Section 110(2) of the Act and not under the Section 124 of the Customs Act - Section 110(2) of the Act deals with extension of time period for issuance of show cause notice within prescribed period of six months of the seizure of the goods. It is obvious from the show cause notice that the same has not invoked the provisions of Section 124 of Customs Act in this case - the another show cause notice has been issued by the DRI dated 7.7.2014 (supra) read with Addendum dated 10.7.2014 and the Commissioner (I G), New Customs House has extended the time limit for issue of show cause notice under Section 124 of the Customs Act in respect of detained goods vide Bill of Entry No. 4314276 dated 10.1.2014 by six months i.e. up to 29.1.2019 under the provisions of sub-section (2) of Section 110 of the Customs Act. The present show cause notice is issued in continuation to the earlier show cause notice issued by the DRI where the provisions of Section 124 of the Act has been invoked. The appellant has not provided the copies of these orders before us so as to arrive at the conclusion as to whether the impugned show cause notice and adjudication order is the extension of the previous show cause notices along with addendum which has been clearly spelt out with adjudicating authority - the present show cause notice in effect has to be treated as having been issued under Section 124 of the Customs Act in effect has to be treated as proviso under 110(2) of the Act. Compliance with KYC norms - Held that:- CHA helps not properly verified the functioning of the client from at the declared address by using reliable independent and authenticate documents. This was a serious lapse on part of the CHA in verifying the KYC before taking up the Custom clearance of consignment of rough diamond imported by M/s Neotex Exim Pvt. Ltd. - The appellants, considering the nature of the imported goods i.e. rough diamond, would have exercised more vigilant approach before taking up the consignment for Customs clearance after verification of KYC norms of the importer, which has not been done in this case. Impugned order upheld - appeal dismissed - decided against appellant.

  ---

• 2018 (11) TMI 500
  Valuation of imported goods - hydraulic pump - rejection of declared value - enhancement in value based on contemporaneous import - propriety of exercise of jurisdiction to reject the declared value of the goods imported by the appellant - Held that:- The declared value appears to be unduly low in comparison with other imports and the price at which the manufacturer sold hydraulic pumps ; it is also not less significant that the appellant failed to produce an invoice from the manufacturer. Considering all these aspects, the rejection of declared value stands upheld. The responsibility of the assessing officer does not cease with rejection of declared value and, in accordance with the sequential hierarchy of valuation prescribed for resort to Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, revised assessable value was to be arrived at. Failure to do so would render rejection under rule 10 A to be an exercise in futility - Rule 5 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 does accord flexibility to vary the declared price of contemporaneous imports to adjust for slight variations. It appears that the adjudicating authority has, accordingly, adopted value which coincides with the price declared in the imports effected by the group concern subsequent to the import of the impugned goods - there are no reasons to discard the enhanced value adopted by the adjudicating authority. Redemption fine - impugned goods not available - Held that:- It is clear from the decision of the Hon ble High Court of Bombay in re Finesse Creation Inc [2009 (8) TMI 115 - BOMBAY HIGH COURT] that redemption fine cannot be imposed on goods that are not available for taking possession of upon confiscation under section 111 of Customs Act, 1962 - There is no dispute that the impugned goods are not available, redemption fine cannot be imposed. There are two discrete processes leading to recovery of differential duty. Recourse to enhancement of value does not, ipso facto, arise from mis-declaration of the value in the bill of entry but from the particular scheme of assessment. Accordingly, invoking of section 111 of Customs Act, 1962 must rest upon evidences other than the mere fact of enhancement of assessable value - Evidence of mis-declaration should be made available to the noticee before doing so. Accordingly, in the present circumstances the confiscation under section 111 of Customs Act, 1962 lacks sanction of law. With the setting aside of liability to confiscation, the invoking of section 112 of Customs Act, 1962 also fails. The recovery of duty under section 28 of Customs Act, 1962 on the impugned goods upheld - the redemption fine and penalties are set aside - appeal allowed in part.

  ---

• Service Tax

• 2018 (11) TMI 496
  Non-payment of Service tax - Cargo Handling Service - appellant had collected Service Tax from their clients but not paid to Government - service tax with interest paid on being pointed out before issuance of SCN - Held that:- The appellants have paid the Service Tax, interest and 25% of the penalty within the stipulated period and is entitled to the benefit of Section 80 to the extent of remaining 75% of the penalty - appeal disposed off.

  ---

• 2018 (11) TMI 495
  Levy of service tax - Income from insurance Co. for rendering CTCS to their agents - Commercial Training and Coaching Center Service or not? - Held that:- It is an admitted fact that to become the insurance agent it is mandatory in law for him to undergo a training program and thereafter to clear an exam conducted by Insurance Regulatory and Development Authority (IRDA) - for while providing training to insurance agents the appellants are not providing the service of Commercial Training and Coaching Center Service. The income derived from such service is therefore not taxable - demand not sustainable. Commercial Training or Coaching Services or not - Demand on income from Indira Gandhi National Open University (IGNOU) and from Punjab Technical University (PTU) - demand has been confirmed for want of evidence establishing that the income for the impugned period was received for and on behalf of IGNOU and PTU - Held that:- Due accreditation of appellants from both these universities is very much on record. There is no dispute that IGNOU and PTU both are constituted under law - since IGNOU and PTU are constituted in exercise of the legislative power the accreditation by them in favour of the appellant is very much covered under the terms “recognized by law” - demand set aside. Demand on hiring charges recovered from IGNOU - scope of SCN - Held that:- The demand for the charges received as hiring of computer, stationery, etc. charges under commercial tanning and coaching service is not sustainable. Such kind service may be classified as supply of tangible goods. But the impugned Show Cause Notice has not proposed the demand under the head of supply of tangible goods - The law is settled that the adjudicating authorities are not allowed to go beyond the scope of show cause notice - demand set aside. Demand on Income from IIHT - Held that:- From the clause of the agreement between appellant and IIHT and in view of the admitted fact that the appellant is the service tax provider whereas IIHT is the recipient thereof Section 68 of the Finance Act, 1944 acquires relevance according to which the liability to pay service tax in such manner and within such period as may be prescribed, rests upon such person who is providing taxable services to any other person. Thus the statue itself prohibits any agreement of services provider and service recipient to agree for the liability to be discharged by the services recipient, unless and until it is so provided by any other provision of law - demand upheld. Demand on Bitcom Tuition fees - Held that:- As per notification no.24/2004 vocational training institute means a Commercial Training or Coaching Centre which provides vocational training or coaching that impart skill to enable the trainee to seek employment or undertakes an employment directly after such training or coaching. Since the nature of training in the present case is about latest information technology programs such as networking, cloud computing net java etc., the training is a job specific talent devolvement - the appellant is opined to be a vocational training institute entitled for the exemption of above notification dated 10.09.2004 - demand set aside. Demand as raised for miscellaneous income - Held that:- There is no evidence on record to this effect the original adjudicating authority has clearly recorded that despite a ledger account was asked from the appellant they have failed to provide same. In absence thereof the miscellaneous income is held to have been received in relation to providing the services of commercial training and coaching. In the absence of evidence to prove the assertion of the appellant we find no infirmity in the order under challenge same is hereby upheld Time limitation - period of demand herein is April 2004 to September 2009 and Show Cause Notice is dated 22.04.2010 - Penalty - Held that:- The appellants are providing coaching and training at mega level even for the institutes of repute, any ignorance to the legal provisions about applicable taxability cannot be presumed on their part. Otherwise also ignorance of law is no excuse - When any service provider fails to comply with the provisions of the Finance Act, which make him liable to pay the service tax, the only conclusion drawn is that the same act is with an intent to evade duty - the Department was entitled to invoke the proviso of Section 73 of the Act - penalty also upheld. Appeal allowed in part.

  ---

• Central Excise

• 2018 (11) TMI 494
  Principles of Natural Justice - it is alleged that the assessee had suppressed material facts from the authorities which the jurisdictional Assistant Commissioner could unearth in course of the exercise undertaken by such officer - Held that:- It is not in dispute that the relevant report of the jurisdictional Assistant Commissioner dated November 21, 2001 was not made available to the assessee at any point of time before or after the passing of the order of the said Commissioner. It is also not in dispute that such report was not referred to in the show cause notice that culminated in the process of adjudication resulting in the order dated September 21, 2007 being passed by the said Commissioner. It is elementary that when some matter is used against a person to condemn such person, such person must be afforded an opportunity to look into such matter and furnish any explanation in such regard. At any rate, an opportunity to furnish an explanation must always be afforded. If such opportunity is not afforded but the matter is relied upon to render an adverse finding against such person, it would amount to the breach of the fundamental canons of natural justice - In the present case, it is evident that the finding rendered by the said Commissioner in the order dated September 21, 2007 is almost exclusively based on the adverse report of the jurisdictional Assistant Commissioner and such report was never made available to the petitioner nor was the same alluded to in the show cause notice that culminated in the hearing afforded by the said Commissioner. A contention that an action or a decision is contrary to the principles of natural justice can come in many hues and forms. Merely because a person is represented before an adjudicating authority does not imply that there was no breach of the principles of natural justice. A person may be represented before an adjudicating authority on a particular issue but the adjudicating authority may render a decision on a completely different issue. The mere presence or representation in such an event does not cure the breach. The judgment and order impugned in the appeal dated March 17, 2016 are set aside - the matter will be considered afresh in accordance with law by the said Commissioner and a fresh decision rendered within four months from date - appeal allowed by way of remand.

  ---

• 2018 (11) TMI 493
  CENVAT Credit - inputs/capital goods used in their Research and Development (R&D) unit - case of the Department is that since the capital goods installed in the R&D Division are not used for manufacture of finished products, they are not eligible for Credit - Held that:- R&D Division is an integral part of the factory wherein the quality testing and other activities for improving the products takes place. It is usual that every manufacturing factory has a R&D Division wherein the Research and Development of the finished products as well as the process of manufacture is undertaken. This being the situation, the capital goods installed in the R&D Division are used in relation to the activity of manufacture and therefore, eligible for Credit. Disallowance of Credit on inputs - Held that:- The definition of inputs that the goods brought within the factory used for any purpose would be eligible for Credit. Thus, the definition of inputs has a wide ambit so as to cover all goods which have been brought into the factory - credit allowed. Appeal allowed - decided in favor of appellant.

  ---

• 2018 (11) TMI 492
  CENVAT credit - education cess paid on inputs - the appellant had stopped availing CENVAT credit on inputs after insertion of Explanation III in rule 6(3) of CENVAT Credit Rules, 2004 - demand of interest - Held that:- Reliance placed in the case of MAHINDRA & MAHINDRA LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI [2007 (2) TMI 24 - CESTAT, MUMBAI], to hold that the appellant is ineligible to avail CENVAT credit - To consider the cess discharged by the appellant under another law to which CENVAT Credit Rules, 2004 does not apply, or coverage therein by self-inflicted burden of duty, despite escapement under law, would be a construction that negates the entire scheme of CENVAT credit. Accordingly, the erasure of CENVAT credit in the impugned order cannot be faulted - liability of interest upheld. Penalty u/r 25 and rule 26 of CENVAT Credit Rules, 2004 - Held that:- It is not controverted that the credit so availed has been utilised for any purpose. Moreover, it was only with the insertion of Explanation III in rule 6(3) of CENVAT Credit Rules, 2004 that the ineligibility became unambiguously clear - penalty not warranted. Appeal allowed in part.

  ---

• 2018 (11) TMI 491
  Clandestine removal - penalty u/r 209A of Central Excise Rules, 1944 on Shri Ajay Shah and on M/s Royal Synthetics - unaccounted production and clandestine clearance using the cover of legitimate invoices repeatedly while recording the production of ‘alkyd’ and ‘maleic’ resin - Held that:- The proceedings against Shri Ajay Shah is not based on a separate set of evidences relating to his particular role as distinct from M/s Royal Synthetics. Therefore, the imposition of penalty on him under rule 209A of Central Excise Rules, 1944 is not in accordance with the law. Applicability of Rule 209A on M/s Royal Synthetics - Held that:- The impugned order has rendered elaborate findings on the manner in which M/s Royal Synthetics stood to gain from the handing of goods that had been clandestinely removed from the premises of M/s Universal Polymers and the active collaboration that enabled the disposal of unaccounted production of M/s Universal Polymers. The findings per se are not contributed by Learned Counsel for appellants - The unquestioned documentary evidence would suffice to establish the clandestine removal and the handling of such goods by M/s Royal Synthetics. In the circumstances, the appeal of M/s Royal Synthetics fails to find favor. The penalty imposed on Shri Ajay Shah is set aside while the penalty imposed on M/s Royal Synthetics is confirmed - appeal allowed in part.

  ---

• 2018 (11) TMI 490
  Recovery of CENVAT Credit availed - inputs - speciality polymers - on completion of re-packing and re-labelling, the said ‘speciality polymers’ were cleared on payment of appropriate duties undisputedly more than the duty borne on procurement, by debit of CENVAT credit account - Held that:- It is seen from the records that there is no dispute on the duty liability discharged on the procurement of ‘speciality polymers’ and even if such procured inputs, capable of being utilised in manufacturing process, were to be cleared as such, the law mandates reversal of CENVAT credit availed at the time of receipt; the discharge of duty liability on the value-added clearance of ‘speciality polymers’ is not of lesser amount. The debits in the CENVAT credit account has, undisputedly, been recorded at the time of the removal of ‘speciality polymers.’ - appeal allowed - decided in favor of appellant.

  ---

• 2018 (11) TMI 489
  Valuation - element of freight expended on behalf of the buyer - inclusion of ‘freight’ amount in assessable value - Held that:- The decision of the Hon’ble Supreme Court in Baroda Electric Meters Ltd [1997 (7) TMI 126 - SUPREME COURT OF INDIA] has laid down the principle that ‘freight’ has nothing to do with the activity of manufacturing which is the object of taxation under Central Excise Act, 1944 - Amount not included in assessable value - appeal allowed - decided in favor of appellant.

  ---

• 2018 (11) TMI 488
  CENVAT Credit - input service distribution - denial on the ground that the ISD invoices should have been issued in respect of the three factories on pro rata basis - Rule 7(d) of the CENVAT Credit Rules, 2004 - extended period of limitation - Held that:- The period of dispute is from 2011-12 to December, 2014 and admittedly, the amendment to Rule 7 was with effect from 01.04.2012 and hence, there was nothing in the statute requiring pro rata distribution. Moreover, there is no service tax applicability to the appellant’s factory at Jammu & Kashmir - The appellant’s claim as to its factory at Vapi having started only in the year 2013-14 merits credence since the same has not been negated by the Revenue. Extended period of limitation - Held that:- Revenue has only mechanically alleged suppression on the ground that but for Revenue’s Audit, the same would not have come to light - extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2018 (11) TMI 516
  Input tax credit - UPVAT Act - claim of credit raised by the dealer opposite party on usage of D.E.P.B. Skips licence while making custom duty on the imported goods - Held that:- This revision is squarely covered by the decision in the case of The Commissioner of Commercial Tax U.P., Lucknow v. S/S Dhooper Chemicals Pvt. Ltd. [2018 (3) TMI 1660 - ALLAHABAD HIGH COURT], where Division Bench in the case of JAGRITI PLASTICS LTD., N.F. IMPEX PVT. LTD. VERSUS COMMISSIONER OF TRADE & TAXES [2015 (10) TMI 291 - DELHI HIGH COURT] has held that D.E.P.B. scrips has contributed, if not directly then indirectly, to the price of imported commodity sold by the Assessee in the market - Revision dismissed.

  ---

• Indian Laws

• 2018 (11) TMI 499
  Dishonor of Cheque - Section 138 of the Negotiable Instruments Act - case of petitioner is that Since the petitioner has deposited the entire compensation amount of Rs. 4,25,000/- therefore, the matter can be given quietus - Conviction and sentence under Section 138 of the Negotiable Instruments Act, 1881 - Held that:- This Court after being satisfied that the cheque amount with the assessed cost and interest has been paid, can close the proceedings even in absence of the complainant. The issue is no longer res integra in view of the very recent judgment of the Hon’ble Supreme Court in Bhangu Trading Co. and another versus Surjit Singh (dead) [2018 (8) TMI 1345 - SUPREME COURT OF INDIA], where it was held that Since the parties have settled the disputes, to do complete justice, the disputes should be given a quietus, subject to appropriate terms. Since, the petitioner has already paid the entire compensation amount, therefore, quashing of the complaint initiated at the instance of complainant/respondent would be a step towards securing the ends of justice and to prevent abuse of process of the Court, especially, when the petitioner is facing pangs and suffered agony of protracted trial and thereafter appeal/revision for the last more than three years and has deposited the entire compensation amount of Rs. 4,25,000/- - it is ordered that the impugned substantive sentence of simple imprisonment imposed in this case shall stand modified and substituted in lieu of the amount of compensation of Rs. 4,25,000/- that stands already deposited/paid by the petitioner. Petition disposed off.

  ---

• 2018 (11) TMI 498
  Maintainability of application - SARFAESI Act - default in repayment of a secured debt or any instalment - recovery of borrowed amount - physical or actual possession of secured assets by banks/financial institutions not taken place - Whether an application under section 17(1) of the SARFAESI Act, at the instance of a borrower, is maintainable even before physical or actual possession of secured assets is taken by banks/financial institutions in exercise of their powers under section 13(4) of the Act read with rule 8 of the Security Interest (Enforcement) Rules, 2002? Held that:- There isa radical change in the borrower dealing with the secured asset from this stage. At the stage of a section 13(2) notice, section 13(13) interdicts the borrower from transferring the secured asset (otherwise than in the ordinary course of his business) without prior written consent of the secured creditor. But once a possession notice is given under rule 8(1) and 8(2) by the secured creditor to the borrower, the borrower cannot deal with the secured asset at all as all further steps to realise the same are to be taken by the secured creditor under the 2002 Rules. Section 19, which is strongly relied upon by Shri Ranjit Kumar, also makes it clear that compensation is receivable under section 19 only when possession of secured assets is not in accordance with the provision of this Act and rules made thereunder. That this is the general scheme of the Act is also clear from section 17(2) which states that the Debts Recovery Tribunal, when an application is filed before it, shall consider whether any of the measures referred to in section 13(4) taken by the secured creditor are in accordance with the provisions of the Act and rules made thereunder. The scheme of section 13(4) read with rule 8(1) therefore makes it clear that the delivery of a possession notice together with affixation on the property and publication is one mode of taking “possession” under section 13(4) - This being the case, it is clear that section 13(6) kicks in as soon as this is done as the expression used in section 13(6) is “after taking possession”. Also, it is clear that rule 8(5) to 8(8) also kick in as soon as “possession” is taken under rule 8(1) and 8(2). The statutory scheme, therefore, in the present case is that once possession is taken under rule 8(1) and 8(2) read with section 13(4)(a), section 17 gets attracted, as this is one of the measures referred to in section 13(4) that has been taken by the secured creditor under Chapter III. It is hereby declared that the borrower/debtor can approach the Debts Recovery Tribunal under section 17 of the Act at the stage of the possession notice referred to in rule 8(1) and 8(2) of the 2002 Rules - appeal allowed.

  ---

• 2018 (11) TMI 497
  Scope and ambit of Section 311 Cr.P.C. - calling upon to produce pronote acknowledging the receipt of the borrowed amount - Held that:- Section 311 Cr.P.C. has been enacted to enable the Court to find the truth and render a just decision whereunder any Court by exercising its discretionary authority at any stage of inquiry, trial or other proceedings can summon any person as a witness or examine any person in attendance though not summoned as a witness or recall or re-examine any person already examined, who is expected to be able to throw light upon the matter in dispute - The object of the provision as a whole is to do justice not only from the point of view of the accused and the prosecution but also from the point of view of an orderly society. Yet, this power has to be exercised only for strong and valid reasons that too with care, caution and circumspection. Recall is not a matter of course and the discretion given to the Court has to be exercised judicially to prevent failure of justice. The execution of the pronote does stand established, but whether the same was, in fact, executed or not or whether the pronote is the same pronote as is alleged to have been executed is a matter of trial and this Court would refrain from giving any definitive opinion upon the same. However, what appears to have clearly been ignored by the learned trial Court while rejecting the application is the salutary provision of Section 311 is that it has failed to adhere to the well known adage that every trial is a voyage in which quest for truth is the goal. Petition allowed.

  ---