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TMI Tax Updates - e-Newsletter November 16, 2017 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles MERE RECOVERY OF TAINTED MONEY IS NOT SUFFICIENT TO CONVICT ACCUSED GST UPDATE ON APPLICABILITY OF GST WHERE BOTH SUPPLIER AND RECIPIENT OF RENTING OF IMMOVABLE PROPERTY SERVICE ARE LOCATED OUTSIDE INDIA AND PROPERTY IS SITUATED IN INDIA Form GSTR-3B of GST - Boon or Curse News Latest GST Notifications (CGST Rate and IGST Rate) to give effect to gst council decisions Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified RBI Reference Rate for US $ Notifications Customs 86/2017 - dated 14-11-2017 - Cus Seeks to exempt import of goods specified goods when imported by eminent sportsperson 85/2017 - dated 14-11-2017 - Cus Seeks to amend notification No. 50/2017-Customs dated 28.06.2017, so as to :exempt life saving drugs supplied free of cost; and exempt IGST on goods imported on lease. 109/2017 - dated 15-11-2017 - Cus (NT) Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg. FEMA 369/2017-RB - dated 14-11-2017 - FEMA Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2017 GST 66/2017 - dated 15-11-2017 - CGST Seeks to exempt all taxpayers from payment of tax on advances received in case of supply of goods 65/2017 - dated 15-11-2017 - CGST Seeks to exempt suppliers of services through an e-commerce platform from obtaining compulsory registration 64/2017 - dated 15-11-2017 - CGST Seeks to limit the maximum late fee payable for delayed filing of return in FORM GSTR-3B from October, 2017 onwards 63/2017 - dated 15-11-2017 - CGST Seeks to extend the due date for submission of details in FORM GST-ITC-04 62/2017 - dated 15-11-2017 - CGST Seeks to extend the time limit for furnishing the return in FORM GSTR-6 for the month of July, 2017 61/2017 - dated 15-11-2017 - CGST Seeks to extend the time limit for furnishing the return in FORM GSTR-5A for the months of July to October, 2017 60/2017 - dated 15-11-2017 - CGST Seeks to extend the time limit for furnishing the return in FORM GSTR-5, for the months of July to October, 2017 59/2017 - dated 15-11-2017 - CGST Seeks to extend the time limit for filing of FORM GSTR-4 58/2017 - dated 15-11-2017 - CGST Seeks to extend the due dates for the furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores 57/2017 - dated 15-11-2017 - CGST Seeks to prescribe quarterly furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of upto ₹ 1.5 crore 56/2017 - dated 15-11-2017 - CGST Seeks to mandate the furnishing of return in FORM GSTR-3B till March, 2018 55/2017 - dated 15-11-2017 - CGST The Central Goods and Services Tax (Twelfth Amendment) Rules, 2017. 47/2017 - dated 14-11-2017 - CGST Rate Seeks to amend notification No. 12/2017-CT(R) so as to extend exemption to admission to “protected monument” and to consolidate entry at Sl. No. 11A & 11B. 46/2017 - dated 14-11-2017 - CGST Rate Seeks to amend notification No. 11/2017-CT(R) so as to specify rate @ 2.5% for standalone restaurants and @9% for other restaurants, reduce rate of job work on “handicraft goods” @ 2.5% and to substitute “Services provided” in item (vi) against Sl No. 3 in table. 45/2017 - dated 14-11-2017 - CGST Rate Concessional GST rate of 2.5% on scientific and technical equipments supplied to public funded research institutions. 44/2017 - dated 14-11-2017 - CGST Rate seeks to amend notification no. 5/2017- Central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of ITC on certain fabrics. 43/2017 - dated 14-11-2017 - CGST Rate seeks to amend notification no. 4/2017- Central tax(rate) dated 28.06.2017 to give effect to gst council decision regarding reverse charge on raw cotton. 42/2017 - dated 14-11-2017 - CGST Rate seeks to amend notification no. 2/2017- Central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions. 41/2017 - dated 14-11-2017 - CGST Rate Seeks to amend notification no. 1/2017- Central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates. 12/2017 - dated 15-11-2017 - IGST Integrated Goods and Services Tax Amendment Rules, 2017 50/2017 - dated 14-11-2017 - IGST Rate Seeks to amend notification No. 30/2017-Integrated Tax (Rate) dated 22.09.2017, so as to extend the benefit of IGST exemption, applicable in relation to supply of Skimmed milk powder, or concentrated milk for use in the production of milk distributed through dairy co-operatives to the companies that are registered under the Companies Act, 2013 also. 49/2017 - dated 14-11-2017 - IGST Rate Seeks to amend notification No. 9/2017-IT(R) so as to extend exemption to admission to “protected monument” and to consolidate entry at Sl. No. 12A & 12B. 48/2017 - dated 14-11-2017 - IGST Rate Seeks to amend notification No. 8/2017-IT(R) so as to specify rate @5% for standalone restaurants and @18% for other restaurants, reduce rate of job work on “handicraft goods” @ 5% and to substitute “Services provided” in item (vi) against Sl No. 3 in table. 47/2017 - dated 14-11-2017 - IGST Rate Concessional GST rate of 5% on scientific and technical equipments supplied to public funded research institutions. 46/2017 - dated 14-11-2017 - IGST Rate seeks to amend notification no. 5/2017- Integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of ITC on certain fabrics. 45/2017 - dated 14-11-2017 - IGST Rate Seeks to amend notification no. 4/2017- Integratedtax(rate) dated 28.06.2017 to give effect to gst council decision regarding reverse charge on raw cotton. 44/2017 - dated 14-11-2017 - IGST Rate seeks to amend notification no. 2/2017- Integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions 43/2017 - dated 14-11-2017 - IGST Rate Seeks to amend notification no. 1/2017- Integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates. 47/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification No. 12/2017-UTT(R) so as to extend exemption to admission to “protected monument” and to consolidate entry at Sl. No. 11A & 11B 46/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification No. 11/2017-UTT(R) so as to specify rate @ 2.5% for standalone restaurants and @9% for other restaurants, reduce rate of job work on “handicraft goods” @ 2.5% and to substitute “Services provided” in item (vi) against Sl No. 3 in table 45/2017 - dated 14-11-2017 - UTGST Rate Seeks to provide concessional GST rate of 2.5% on scientific and technical equipments supplied to public funded research institutions 44/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification no. 5/2017- Union Territory tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of ITC on certain fabrics 43/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification no. 4/2017- Union Territory tax(rate) dated 28.06.2017 to give effect to gst council decision regarding reverse charge on raw cotton 42/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification no. 2/2017- Union Territory tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions 41/2017 - dated 14-11-2017 - UTGST Rate Seeks to amend notification no. 1/2017- Union Territory tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates. VAT - Delhi No. F.2(12)Policy/2017/1066-1073 - dated 15-11-2017 - DVAT Extension of last date w.r.t submission of closing stock by dealer Circulars / Instructions / Orders GST Order No. 9/2017 - dated 15-11-2017 Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Central Goods and Service Tax Rules, 2017 Order No. 10/2017 - dated 15-11-2017 Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017 16/16/2017 - dated 15-11-2017 Clarifications regarding applicability of GST and availability of ITC in respect of certain services 17/17/2017 - dated 15-11-2017 Manual filing and processing of refund claims in respect of zero-rated supplies - reg. DGFT Policy Circular No. 02 - dated 14-11-2017 Order of the High Court, Hyderabad in W.P: No 34771/2014 in in respect of item at EXIM Code 1005 Maize (Corn) Highlights / Catch Notes GST Integrated Goods and Services Tax Amendment Rules, 2017 - Apportionment of IGST with respect to advertisement services under section 12 (14) of the IGST Act, 2017. Visit to Get Source Quarterly furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of upto ₹ 1.5 crore - New time schedule Visit to Get Source Due dates for the furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores - New time schedule Visit to Get Source Return by a composition supplier - time limit for filing of FORM GSTR-4 for the quarter July to September, 2017 extended till 24-12-2017 Visit to Get Source return by a non-resident taxable person - time limit for furnishing the return in FORM GSTR-5, for the months of July to October, 2017 extended till 11-12-2017 Visit to Get Source Online Information Database Access and Retrieval services (OIDAR) - time limit for furnishing the return in FORM GSTR-5A for the months of July to October, 2017 extended till 15-12-2017 Visit to Get Source Return by Input Service Distributor (ISD) - Time limit for furnishing the return in FORM GSTR-6 for the month of July, 2017 extended till 31-12-2017 Visit to Get Source Due date for submission of details in FORM GST-ITC-04 extended. Now it can be filed upto 31-12-2017 - goods dispatched to a job worker Visit to Get Source Maximum late fee payable for delayed filing of return in FORM GSTR-3B from October, 2017 onwards fixed as ₹ 25/- per day [in case of Nil return, it will ₹ 10/- per day] Visit to Get Source Suppliers of services through an e-commerce platform exempted from obtaining compulsory registration if aggregate turnover is not exceeding rupees 20 lacs [Rs. 10 lacs in case of spl category states] Visit to Get Source GST on receipt of advance - Now all assessee are allowed pay tax at time of supply of goods [This concession is not for service providers] Visit to Get Source Services - General Exemption from GST - CGST / UTGST / SGST / IGST - Table as amended Visit to Get Source Rate of Tax on Services - Table as amended Visit to Get Source Exempts Skimmed milk powder, or concentrated milk - supplied to a distinct person - for distribution through dairy cooperatives or companies - Notification as amended Visit to Get Source Rates for supply of services under IGST Act - Notification as amended Visit to Get Source Concessional GST rate of 5% on scientific and technical equipments supplied to public funded research institutions. - Notification Visit to Get Source Supplies of goods in respect of which no refund of unutilised input tax credit shall be allowed - Notification as amended [restriction of ITC on certain fabrics] Visit to Get Source Reverse charge on certain specified supplies of goods u/s 5(3) - Notification as amended [To include Raw cotton under mandatory RCM mechanism] Visit to Get Source Latest GST Notifications (CGST Rate and IGST Rate) to give effect to gst council decisions Visit to Get Source Case Laws: GST 2017 (11) TMI 809 Disqualification of petitioner - petitioner's bid treated as nonresponsive and ineligible on the sole ground that while submitting the bid the petitioner no.1 has not paid Goods and Services Tax to the respondent with the Bid/ Document Fee - at the time of submitting bid the petitioners made the payment of ₹ 18000/towards bid / document fees, however without GST @18% as demanded as per the tender document / notice - It is the case on behalf of the petitioners that thereafter, in absence of any information about the GSTIN of the respondent Corporation, the petitioner no.1 has made the payment of GST by depositing the amount as per reverse charge mechanism on 3.10.2017 at around 12.00 p.m within the time prescribed for the said purpose under law. Held that: - At the outset, it is required to be noted that as such in the present case the petitioners are not considered to be tenderer at all by the respondent Corporation on non deposit of entire amount of bid document fee, which as such was required to be paid as per the terms and conditions of the tender document and “nProcure” document. It is required to be noted that as per “nProcure” document the party who submit its bid online was required to deposit / pay within the stipulated time the bid document fee/ bid processing fee of ₹ 21240/which includes GST at 18%. It is an admitted position that when the petitioners submitted its bid online and thereafter in physical format the petitioners did not pay the entire amount of bid document fee/ bid processing fee of ₹ 21240/and deposited only part of the bid document fee / bid processing fee i.e. ₹ 18000/only. At this stage, it is required to be noted that other two tenderers who submitted their bid, paid / deposited the entire document fee / bid processing fee i.e. ₹ 21,240/. Thus, in the tender consolidation details and “nProcure” tender consolidated details deposit of entire amount of document fee and EMD details was mandatory to be paid. It is an admitted position that as the petitioners did not deposit the entire bid document fee / bid processing fee at the time of submitting the bid / bid document and therefore, no such receipt in favour of petitioner has been generated like in the case of other two bidders who in fact paid the entire bid document fee / EMD and therefore, the petitioners are not considered at all tenderer / bidder and therefore, its bid has not been considered at the technical bid stage. The issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. The decision of the respondent Corporation in not treating and / or considering the petitioners as tenderer / bidder and in holding the petitioners ineligible even prior to technical bid stage, cannot be said to be perverse and / or arbitrary and suffering from vice of favoritism. The understanding on the part of the respondent Corporation with respect to applying relevant terms and conditions of the tender document and to treat and / or consider the deposit of bid document fee / bid processing fee and the EMD before relevant date as essential condition to be fulfilled and / or complied with the at the entry stage itself cannot be said to be perverse and / or arbitrary to the terms and conditions of the tender document. At this stage, it is required to be noted that as such there are no specific allegation of mala fide and / or favoritism. The petitioners was not required to deposit the amount of GST. The petitioners and others were required to deposit as such ₹ 21,240/towards bid document fee/ bid processing fee which includes GST amount at 18%. Therefore, there was no question of furnishing any details of GST registration / GSTIN, as now stated by the petitioners. At this stage, it is required to be noted even at the cost of repetition that other two bidders did deposit the entire amount of ₹ 21,240/and thereby complied with the relevant terms and conditions / essential conditions. What is required to be considered as payment of entire amount of bid document fee / bid processing fee and the EMD at the relevant time and before the prescribed period mentioned in the tender document. As observed herein above, such a requirement was required to be complied with the entry stage itself. As observed herein above, unless and until, entire amount of bid document fee/ bid processing fee and the EMD is deposited the persons who submitted bid would not get entry at all and only after the aforesaid amount is deposited / paid and receipt is generated, the concerned party can be said to be tenderer / bidder whose bid is required to be considered at technical stage and thereafter on fulfillment of other terms and conditions, its price bid is required to be considered. Petition dismissed - decided against petitioner. Income Tax 2017 (11) TMI 808 Capital gain computation - consideration paid for free-hold - Assessee transfers his land by way of "capital contribution" and becomes a partner in the firm, does it result in transfer in terms of Section 2 (47) of Act, 1961 or the term ''transfer' has to be construed in the light of Act, 1882 - Whether Tribunal has erred in law in holding that full value of consideration shall be determined as per Section 45 (3) and not under Section 50C of Act, 1961? - Held that:- SLP dismissed. HC order confirmed. [2017 (1) TMI 1471 - ALLAHABAD HIGH COURT] HC has held that Tribunal failed to appreciate that the entire land came to be acquired by Assessee only on 31st March, 2002. Prior thereto, it had no lawful right or interest in the property in dispute which belonged to State of U.P. Even as per book value, cost of land determined and share profits determined between the parties and their capital contribution is so negligible, as it did not conform to even any normal business transaction entered into by a person of ordinary prudence, and, therefore, there existed all the facts and circumstances to show prima facie that entire transaction of contribution to partnership is a sham and fictitious transaction and an attempt to device a method to avoid tax. Even the terms and conditions of partnership fortify the above inference. Tribunal has not looked into the matter with regard to colorable device and sham transaction of partnership, which was an issue directly raised by Revenue right from the stage of ACIT and onwards, and for that purpose matter requires to be remanded to Tribunal. - Decided against assessee. 2017 (11) TMI 807 TPA - MAM - Appropriateness of the Resale Price Method (RPM) - TPO rejected that and applied the Transactional Net Margin Method (TNMM) as the most appropriate and proximate test - Held that:- This Court is of the opinion that the mere circumstance that of a disagreement either between the assessee and the Revenue authorities or amongst the Revenue authorities in the application of one or other methods for determining ALP ipso facto does not constitute question of law. This, however, not to say that if in a given case the aggrieved party is able to show that the rule applied has led to distortion or prejudice as the case may be, the question of law does not arise. In the present case, however, no such factors are present. This question of law therefore does not arise. Furthermore, the Court also takes note of the fact that in the subsequent year the RPM was endorsed by the TPO itself. Seed development/agronomy expenditure which was treated as capital in nature by the AO. The CIT(A) took a contrary position; that was endorsed by the ITAT being pure finding of fact. The Court is of the opinion that no substantial question of law arises. 2017 (11) TMI 806 Penalty u/s 271AAA - ITAT holding that the penalty imposed was on an incorrect appreciation of law - Held that:- For A.Y. 2010-11, search assessment was completed under Section 153A. On the basis of additions made, the AO proceeded to impose penalty upon two Directors under Section 271AAA of the Act. The aggrieved assessee and parties preferred appeals; the Appellate Commissioner reversed the findings and deleted the penalties. The ITAT noticed that the functional jurisdiction inter alia for imposition of penalty under Section 271AAA of the Act is the admission in the course of the statement made during the search proceedings and that such a fact did not exist in the circumstances of the case. Therefore, based upon its own previous order in Addl. Commissioner of Income Tax v. Emirates Technologies Pvt. Ltd. (2016 (10) TMI 1071 - ITAT DELHI ) correctly deleted the penalty. No substantial question of law 2017 (11) TMI 805 Exemption u/s 11 denied - charging of fee from members or non-members for rendering services like training, conducting seminars - Held that:- Mere charging of fee from members or non-members for rendering services like training, conducting seminars would not ipso facto lead to denial of exemption. The dominant object of the assessee remains charitable and the aforesaid activities are only incidental to the main activity of the assessee. Also, the activities of the assessee are benefiting the public at large at submitted by the Ld. Counsel for the assessee. Furthermore, it is not the case of the department that any change in objects had taken place in the relevant year so as to take the assessee outside the ambit of section 2(15). The effect of the amendment has been discussed elaborately in ITPO Case (2015 (1) TMI 928 - DELHI HIGH COURT) as well as Andhra Pradesh Chamber of Commerce (1964 (10) TMI 19 - SUPREME Court ) and the test of dominant object has not been altered even after the said amendment. We therefore hold that the denial of exemption under section 11 and 12 in the case of the assessee is not in accordance with law and accordingly the additions made by the AO and confirmed by the CIT(A) are deleted. No substantial question of law - Decided against revenue 2017 (11) TMI 804 Acceptance of TDS certificate in the name of company - as submitted by learned Senior Counsel, Mr. Mihir Thakore that under demerger, the applicant company is the resulting company in the place of the transferor company i.e. M/s Kesar Enterprise Limited and, a such, TDS Certificate cannot be issued in the name of transferor company i.e. M/s Kesar Enterprise Limited - Held that:- We dispose of this application, directing the respondents not to take any coercive action, as per communication dated 10.11.2017 addressed by the respondent No.3 and further, by directing the respondents to accept the TDS Certificate in the name of the applicant company. It is made clear that such acceptance is without prejudice to the rights of the parties in the pending appeal before this Court. 2017 (11) TMI 803 Addition of unexplained income from undisclosed sources - Held that:- Here in this case, as stated above, the addition has been made by the AO on the protective basis on the ground that entire deposits should be added in the hands of Shri Sanjay Kumar Garg. We find that the Tribunal in the case of Shri Sanjay Kumar Garg had applied 0.20% on total deposits appearing in all the bank accounts of all the bogus entities including that of the assessee also. Once in the case of Shri Sanjay Kumar Garg, where substantive addition was made by estimating the commission income from the accommodation entry @ 0.20%, then there is no basis for sustaining the protective addition of entire cash deposits of ₹ 5,56,85,000/- in the hands of the assessee. Therefore, following the Tribunal order, we do not find any merit in the ground No. 1 raised by the revenue and the same is dismissed. Applying of commission rate of 0.20% on the entire cash deposit - Held that:- As the assessee was provided the accommodation entry through his bank account for which he was also getting certain commission from Shri Sanjay Kumar Garg and since rate of commission for accommodation entry has been determined and estimated @ 0.20% in the case of Shri Sanjay Kumar Garg, then same rate of commission will be applied in the case of the assessee also and therefore we do not find any infirmity in the order of the Ld. CIT(A) while confirming the rate of commission of 0.20% on the total deposits and accordingly ground No.1 as raised by the assessee is dismissed. Separate addition on account of commission which has been partly allowed by the Ld. CIT(A) - No reason to sustain the further commission income, because, once we have held that assessee’s commission on the entire cash deposits which is part of total turnover is to be taken @ 0.20%, then there is no requirement for making separate addition again on commission for giving accommodation entry. Accordingly, we delete the entire addition of commission of ₹ 15,07,884/-. Ground No. 2 of the revenue is dismissed. No penalty u/s 271(1)(c) is leviable, because in the quantum proceedings, we have directed that the addition of cash deposits on protective basis cannot be added and only addition sustained is with regard to 0.20% by way of commission on such cash deposits in the hands of the both assessees. Accordingly, the revenue’s appeals are dismissed. 2017 (11) TMI 802 Addition on account of Project Procurement expenses - addition the same were not incurred for the purpose of - business - Held that:- On perusal of the documents, we find that these are mainly agreements between the assessee and commission agent, correspondence between the assessee and the commission agent, copy of invoices issued by the commission agent, evidence of payment released by the principal, copy of contract awarded to the assessee, letter by the assessee appointing the commission agent etc. In our opinion, these documents are not sufficient to demonstrate the actual services rendered by the commission agents. The assessee was required to explain the role of the commission agent in procuring contracts from the government agencies and other principle parties. The assessee was required to furnish documentary evidence, whether the commission agent represented before the parties, who awarded contract to the assessee and whether those commission agent participated in any contract awarding activity or any activity provided in the scope of work in the agreement. The documents submitted by the assessee are mostly computer-generated printouts of correspondence between the assessee and the commission agent. No evidence is available in paper book, as how these correspondences exchanged between the assessee and the commission agent, whether it was through post or whether it was through emails. The assessee has not produced any evidences supporting the technical expertise and experience of the commission agents in the field of services rendered. We are of the opinion that the fact of services rendered has to be examined in each year on the basis of the documentary evidences submitted by the assessee and therefore, issue in dispute cannot be treated as covered by the decision of the Tribunal in assessment year 2004-05. The documentary evidences in the year under consideration for establishing the services rendered need to be produced by the assessee and examined by the Assessing Officer afresh. Accordingly, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine copy all the documents produced by the assessee. Accordingly, the ground of the appeal is allowed for statistical purposes. Transfer Pricing Adjustment - TPO accepted the most appropriate method and comparables selected by the assessee, however, he has taken PLI data of comparables for current year only as against multiple year data taken by the assessee - Held that:- On the issue of single year data versus multiple year data of comparables is concerned, we are of the opinion that for justifying multiple year data of comparables before the Ld. CIT- (A), the assessee contested variation in net profit of the comparables companies. In our opinion, merely variation in the profit cannot justify use of multiple year data until and unless, the reason for variation in the profit are linked to the cyclic nature of business transactions, having financial impact on more than one year. No factual information was brought on record in respect of the comparables other than presenting theoretical or general arguments supporting adoption of multiple year data. In the year under consideration before us, the Rule 10B(4) of the Income-tax Rules, 1962 (in short ‘the Rules’) has specifically provided for using the data of the relevant financial year and data of the two years prior to the relevant financial year could only be considered, if such data reveals facts which could have influence on the determination of the transfer price in relation to the transaction being compared. Before us, the assessee has not brought on record any evidences showing the influence of the cyclic nature of the transactions of the comparables or having financial impact of operational activity over the subsequent years. Thus learned CIT-(A) was not justified in deleting the transfer pricing addition without giving reasons for taking average of multiple year data for computing PLI of comparables. In view of above discussion, we set aside the finding of the Ld. CIT-(A) on the issue in dispute and restore that of Ld. TPO/AO. The ground of appeal is accordingly allowed. Disallowance out of telephone and car expenses - Held that:- In the instant case, the Ld. CIT-(A) has not given any finding on the basis of documents produced by the assessee before him whether the expenditure was incurred wholly and exclusively for the purpose of business or not. Since the Assessing Officer did not get opportunity to examine documents like call registers for telephones and logbook etc. of vehicles as same were neither produced before him in the assessment proceedings nor forwarded to him by the Ld. CIT-(A), the claim of the assessee has remained non-verified by the lower authorities. In the interest of justice, we feel it appropriate to restore the issue to the file of the AO to verify the documentary evidence supporting the claim of the assessee that the expenditures on telephone and car were incurred towards the business purpose only and decide the issue in dispute in accordance with law. The assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is accordingly allowed for statistical purposes. 2017 (11) TMI 801 Penalty u/s 271(1)(c) - change of head of income from ‘short-term capital gains’ to ‘business income’ - Held that:- In the appeals before us, it is undisputed that the impugned amounts, which formed the basis for the AO to levy penalty, were in fact fully reported in the returns. The fact that the AO chose to treat the income under some other head cannot characterise the particulars reported in the return as “inaccurate particulars” or as suppression of facts. Respectfully applying the ratio of the decisions in the case of Reliance Petroproducts Private Limited (2010 (3) TMI 80 - SUPREME COURT) and CIT versus Amit Jain (2013 (1) TMI 340 - DELHI HIGH COURT ), we find no reason to interfere with the adjudication of the Ld. CIT (Appeals) in deleting the impugned penalties in all the four years under consideration. - Decided against revenue 2017 (11) TMI 800 TPA - exclusion and inclusions of the comparables - Selection criteria of comparables - Held that:- Assessee is established in India to undertake software development and installation of computerized systems, conduct feasibility studies, systems analysis and design as well as design of special software and system and application of software. It is also engaged in the business of rendering technical services related to tabulation, coding and software development. It is established to undertake and engaged in export of software, computer skilled manpower and other computer related activities to carry out development in the area of information technology, computer systems, software, application software, integrated tolls for computer systems and application development, data communication and network, thus companies functionally dissimilar with that of assessee need to deselected from final list of comparable. 2017 (11) TMI 799 Disallowance u/s. 14A - Held that:- We have observed that the assessee is engaged in business of direct to home (DTH) satellite television services and teleport services. We further observed that assessee has not received any dividend income or other exempt income during the impugned assessment year. The assessee has conceded and accepted to have incurred ₹ 5 lacs towards an expenditure u/s. 14A towards earning of an exempt income which is claimed to be reasonable expenditure to be disallowed u/s 14A. We have observed that the assessee has not received any exempt dividend income ratio of the decision of Hon’ble Delhi High Court in the case of Cheminvest Limited v. CIT (2015 (9) TMI 238 - DELHI HIGH COURT) and in the case of Ballarpur Industries Limited [2016 (10) TMI 1039 Bombay High Court] is applicable, the disallowance of expenditure u/s 14A in the instant case be restricted to an admitted expenses to have been incurred for earning of the exempt income to the tune of ₹ 5 lack We hereby order deletion of the addition u/s 14A as confirmed by the CIT-A by restricting/upholding the disallowance of expenditure u/s 14A to the tune of admitted expenditure of ₹ 5 lacs claimed to have been incurred by the assessee for earning exempt income as conceded by the assessee. - Decided partly in favour of assessee. 2017 (11) TMI 798 Non-granting of credit of cash seized and pay orders as advance tax against the income tax liability on the income offered in the statement u/s 132(4) - interest charged under section & 234B and 234C - Held that:- Money lying with the department amounting to ₹ 75,50,860/- deserved to be adjusted as advance tax liability and the interest charged under section 234C qua third quarter for non payment of advance tax is not at all legal and justified. u/s 234C, we are of the considered opinion, that the interest for non-default for non payment of tax should not be charges for the last 3rd installment and same is the position with regards to charging interest u/s 234B of the Act. Direct the AO to allow sum to be adjusted against the advance tax and consequently, the interest u/s 234B and 234C for the third quarter installment shall not be chargeable. Accordingly the AO is directed to calculate the interest u/s 234B & 234C after allowing credit of ₹ 75,50,860/- in the advance tax if any. Appeal of the assessee stands allowed. 2017 (11) TMI 797 Revision u/s 263 - CIT has exercised his jurisdiction merely on the basis of audit objection - Held that:- CIT before holding the order of AO as erroneous in so far as prejudicial to the interest of revenue has to find out error after examination of the records. The mere finding of Ld. Pr CIT is that no documentary evidences are available on record does not render the order of the AO as erroneous and prejudicial to the interest of Revenue. In our considered view it was the duty under the Act that the Ld. PR CIT to make necessary inquiry for arriving at a conclusion that the order of AO is erroneous in so far as prejudicial to the interest of revenue. In absence of any specific error we set aside the order passed by Ld. Pr CIT u/s 263 of the Act. Thus the grounds of appeal raised by the assessee are allowed. 2017 (11) TMI 796 Assessment u/s 153A - Addition u/s 14A r.w.r. 8D - Held that:- By the time the search and seizure operation took place under section 132 in case of the assessee on 20th January 2012, assessment for the impugned assessment year stood completed under section 143(3) of the Act. Thus, as on the date of search there was no abated assessment proceeding for the impugned assessment year. Therefore, in the proceedings initiated under section 153A of the Act, the Assessing Officer could have made additions only in respect of income which was found as a result of search or has a nexus with the incriminating materials found as a result of search. On the contrary, in the computation filed along with the original return of income, the assessee made a disallowance of ₹ 10 lakh under section 14A of the Act. Thus, the issue of disallowance of expenditure under section 14A stood concluded on completion of assessment under section 143(3) originally. That being the case, the Assessing Officer has no power to re–visit such issue in the proceeding initiated under section 153A of the Act in the absence of any incriminating material concerning such issue. - Decided in favour of assessee Addition made on account of forfeiture of share warrant - Held that:- Addition was not on the basis of any incriminating material found as a result of search. Rather, all information relating to forfeiture of share warrant and credit to capital reserve account was reflected in audited account as well as notes to the accounts filed along with return of income which was available before the Assessing Officer during the original assessment completed under section 143(3) of the Act. Therefore, on the date of search, there being no abated assessment the Assessing Officer could not have made addition in a proceedings under section 153A in respect of an issue which has no nexus with any incriminating material found during the search. For this reason also addition made cannot be sustained and the order of the learned Commissioner (Appeals) deserves to be upheld. Addition made on account of alleged bogus purchase - dispute is only with regard to source of purchase made by the assessee - Held that:- The facts on record indicate that, though the assessee has made the purchases, however, he has failed to prove the exact source from which such purchases were made. In the circumstances, addition of the entire purchases would not be proper considering the fact that the assessee might have made such purchases by paying cash thereby avoiding payment of VAT. Therefore, for taking care of leakage of revenue on that account, it will be reasonable to estimate the profit on bogus purchase at 12.5%. Therefore, we direct the Assessing Officer to restrict the disallowance @ 12.5% of the bogus purchase. This ground is partly allowed. Addition made on account of delayed payment of employees’ contribution to PF/ESIC - Held that:- There is no dispute that the assessee has paid employee’s contribution to PF/ESIC dues within the due date of return of income as provided under section 139(1) of the Act. That being the case, the ratio laid down by the Hon'ble Jurisdictional High Court in Hindustan Organic Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT ) squarely applies to the fact of the present case. Accordingly, we uphold the decision of the learned Commissioner (Appeals) by dismissing the ground raised. Deduction allowed. Claim of deduction under section 80IC - delivery challan impounded in the course of survey evidencing transfer of readymade garment from Daman Unit - Held that:- As from the observations made by the learned Commissioner (Appeals) it is noticed that through evidence brought on record, the assessee was able to demonstrate that the deduction claimed under section 80IC was in respect of readymade garments manufactured at Baddi Unit and not on stock transfer from Daman Unit. The aforesaid factual finding of the first appellate authority has not been controverted by the Learned Departmental Representative by bringing before us any cogent evidence. Therefore, we are unable to disturb the findings of the learned Commissioner (Appeals) on this issue. Moreover, in the course of hearing it has been brought to our notice by the learned Authorised Representative that assessee’s claim of deduction under section 80IC has been allowed in scrutiny assessment made under section 143(3) for the assessment year 2013–14. The aforesaid fact also gives credence to the genuineness of assessee’s claim. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals). Resultantly, the ground raised by the Revenue is dismissed. 2017 (11) TMI 795 Addition of opening cash balance by treating the same as unexplained income of the assessee u/s 68 - Held that:- Assessee has opened a bank account with Axis Bank on 19.01.2013. In this bank account, there is a deposit of ₹ 3,10,000/- in the month of February, 2013. Out of it, ₹ 2,73,000/- was withdrawn between 13.02.2013 to 28.02.2013 and ₹ 1,60,000/- is deposited back on 13.03.2013 in the bank. Thus, the cash withdrawal for the month of February, 2013 is ₹ 1,13,000/- (Rs. 2,73,000 minus ₹ 1,60,000). In the month of March, 2013, assessee has withdrawn ₹ 1,94,500/-. Thus, the total withdrawal made from the bank account in February & March, 2013 is ₹ 3,07,500/- (Rs.1,13,000+ ₹ 1,94,500). It is also noted that assessee is regularly assessed to tax and in the Balance Sheet as on 31.03.2013, there is cash in hand of ₹ 4,95,222/- (PBP 15). In these facts and circumstances of the case, I do not find any justification in restricting the claim of opening cash in hand at ₹ 1,50,000/- only. The AO is therefore, directed to accept the claim of opening cash in balance of ₹ 4,95,222/-. Hence, the addition confirmed by ld. CIT(A) is deleted by allowing the ground No. 1 of the assessee. Addition treating the loan received as unexplained u/s 68 - Held that:- As the identity, creditworthiness and genuineness of the transaction is established and therefore, the addition is directed to be deleted. Thus ground No. 2 of the assessee is allowed. Addition treating the advance received from Shri Jay Ssingh and Smt. Manju Singh against sale of property as unexplained income of the assessee u/s 68 - Held that:- It is noted that that assessee has received advance from Sh. Jai Singh and Sh. Manju Singh against agreement to sale dated 24.05.2013 in respect of his plot of land at Anirudh Nagar, Bharatpur (PBP 47-48). The AO has recorded statement of both Sh. Jai Singh and Smt. Manju Singh on 21.11.2016. From the extract of the statement reproduced in the assessment order, it is noted that in reply to Q. No. 18 & 19, Sh. Jai Singh has accepted that he and his brother Shivram through his wife Smt. Manju Singh has entered into an agreement with assessee for purchase of said plot for R.21 lacs of which ₹ 15 lacs was paid in advance out of the sale proceeds of agricultural produce and past savings. In Q. No.20, he explained that remaining amount would be paid when the plot is registered in their name. Thus, when both the persons have accepted having given advance to the assessee against sale of plot and in the absence of any contrary material to establish otherwise, the Bench finds no reason to confirm the addition. In this view of the matter, the addition confirmed by the ld. CIT(A) amounting to ₹ 15 lacs. is deleted. Thus allowing Ground No. 3 of the assessee 2017 (11) TMI 794 Revision u/s 263 - CIT justification in invoking revisionary jurisdiction - non examine the allowability of repairs and maintenance of buildings and whether the same is incurred for the purpose of business of the assessee - whether non-enquiry of an item itself would made the order of the ld AO erroneous and prejudicial to the interest of the revenue? - Held that:- We find from the entire paper book filed by the assessee that no query was indeed raised by the ld AO in the course of assessment proceedings with regard to the issue of repairs and maintenance of buildings. There was no occasion for the ld AO to examine the allowability of repairs and maintenance of buildings and whether the same is incurred for the purpose of business of the assessee or whether the same is capital or revenue in nature. We find that absolutely no query was raised or any enquiry was carried out by the AO in this regard. Hence this is a clear case of lack of enquiry on the part of the ld AO for which the revisionary jurisdiction u/s 263 could be invoked by the ld CIT. It has already been held that mere non-enquiry of an item itself would made the order of the ld AO erroneous and prejudicial to the interest of the revenue as has been held by the Hon’ble Supreme Court in the case of Rampriya Devi Saraogi vs CIT (1967 (5) TMI 10 - SUPREME Court) and Tara Devi Aggarwal vs CIT (1972 (11) TMI 2 - SUPREME Court ). When the requisite enquiry that is warranted in the facts of the instant case was not made, then that itself would make the order of the ld AO erroneous and prejudicial to the interest of the revenue. - Decided against assessee. 2017 (11) TMI 793 Levy of penalty u/s. 271(1)(c) - capital gain computation - difference in cost of acquisition adopted - AO did not accepted the cost of acquisition as on 01.04.1981 as adopted by the assessee and relied on the “Indian Valuers Directory & Reference Book”, to incorporate the market value of the property of Mumbai as on 01.04.1981 - Held that:- Hon’ble Supreme Court in the case of Dilip N Shroff vs. JCIT [2007 (5) TMI 198 - SUPREME Court ] on the issue of capital gain on the basis of the valuer’s report, which was not accepted by the Assessing Officer, the penalty was deleted Also the assessee has disclosed all the particulars and nothing was concealed by the assessee and Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ] has clearly concluded that in case there is no concealment on facts or particulars, it cannot be a fit case for levy of penalty of income for furnishing inaccurate particulars of income. In the present case also the disputed penalty is levied 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 of income attracting penalty u/s 271(1)(c). Assessee has chosen to obtain the opinion of a registered valuer and the registered valuer has arrived at his opinion on certain basis. While he making the valuation report, disclosed all particulars. There can be a genuine difference of opinion of different expert and hence, once there is difference of opinion, the penalty u/s 271(1)(c) of the Act cannot be levied - Decided in favour of assessee. 2017 (11) TMI 792 Penalty u/s 271(1)(c) - failure on the part of the assesses to attend the assessment proceedings - proof of reasonable cause - main plea for reasonable cause pleaded by the assessee/s has been that the key person/group head, Shri Gopal Kumar Goyal who was entrusted with the income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release - Held that:- From a perusal of section 273B, we can understand that, notwithstanding anything contained in the provisions of clause (b) of Sub-section (1) of section 271, no penalty shall be imposed on the person or the assessee as the case may be, for any failure referred to in the said provision, if he proves that there was reasonable cause for the said failure. So it can be understood that penalty cannot be imposed, if the assessee is able to prove that there was reasonable cause for the said failure of not complying with the notice served on them under sub-section (1) of section 142 of the Act. The facts submitted by assessee for reasonable cause have not been controverted by the AO or the Ld. CIT (Appeals). All these facts and circumstances, under any prudence, do constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause as highlighted by the assessee/s not only during the course of the assessment proceedings but also before the Assessing Officer and the Learned CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances. - Decided in favour of assessee. 2017 (11) TMI 791 Disallowance of bogus purchase - disallowance equal to gross profit @ 15% of gross turnover - Held that:- As Ganesh Rice Mills vs CIT [2005 (3) TMI 95 - ALLAHABAD High Court] find that the substantial question of law considered was as to whether the tribunal was right in coming to the conclusion that the purchases claimed by the assessee were not genuine ignoring the quantitative account available before the Tribunal. The Hon’ble Allahabad High Court confirmed the findings of the Tribunal that the purchases in question were bogus. There was no occasion for Allahabad High Court to consider whether the entire purchase should be added or income on sales estimated in the given circumstances. We are therefore of the view that the decision relied upon by the ld. DR will not support the plea of the ld. DR before the Tribunal. On the other hand, we find that the decision of Hon’ble Jharkhand High Court in the case of Amitabh Construction P.Ltd. (2011 (5) TMI 821 - Jharkhand High Court) clearly supports the conclusion arrived at by CIT(A). We, therefore, find no grounds to interfere with the order of CIT(A). Consequently ground no.1 raised by the revenue is dismissed. Disallowance on account of interest payment as penal in nature - whether interest was paid by the assessee for delayed payment of excise, income tax and sales tax was liable to be disallowed - Held that:- According to the AO the aforesaid payment was in the nature of penal for infraction of law. Therefore it cannot be allowed as deduction in view of the Explanation 1 to section 37(1) which provides that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business and no deduction on such expenses shall be allowed. The CIT(A) deleted the addition on the ground that the payment in question was not penal in nature but only compensatory for delayed payment and therefore cannot fall within the ambit of Explanation 1 to section 37. We are of the view that the conclusion of CIT(A) on this issue are correct and calls for no interference - Decided against revenue Disallowance on account of ROC expenses on increased authorized capital - addition which was a fee paid to the registrar of companies for increase in share capital of the assessee on the ground that the same was capital in nature and cannot be allowed as deduction in computing the income from business - Held that:- Before us it is not disputed that the said sum was not claimed in the profit and loss account as deduction while computing income from business. In such circumstances we are of the view that the CIT(A) was right in deleting the addition made by the AO and his action is just and proper and calls for no interference. Accordingly ground no.3 raised by the revenue is dismissed. Customs 2017 (11) TMI 790 Recovery of default of the company by ex-Managing Director of the company - case of the petitioner is that he was a Managing Director of a company and that he resigned from the directorship on 18.12.2003 much prior to the issuance of a show cause notice by the Joint Director, Directorate of Revenue Inteligence, Chennai dated 29.3.2004 - petitioner submits that after the interim order was granted by this Court in this writ petition, the first respondent served a copy of the Order-in-Original along with a covering letter dated 18.9.2017. Therefore, the petitioner seeks liberty to work out his remedies before the appropriate forum - Held that: - the impugned demand shall be kept in abeyance for a period of 30 days from the date of receipt of a copy of this order. Within such time, it is open to the petitioner to file an appeal against the Order-in-Original dated 14.2.2008, which was received by the petitioner from the first respondent on 18.9.2017 - petition allowed. 2017 (11) TMI 789 Import of yellow peas - Revenue was of the view that the importers have used the barges without observing the Customs formalities, such as, amendment and inclusion of name of barges in question in the overside discharge guarantee - Held that: - no duty was liable on the imported Yellow Peas and the only reason for the Commissioner to confiscate the goods and to impose penalty, is a procedural lapse by the appellant as also by the CHA inasmuch as the barges on which the goods were un-loaded were not brought to the notice of the Customs Officers by including their names in the over-side discharge guarantee filed by them - Though the said activity of the appellant, is in violation of the procedural condition as envisaged in the Customs Act, 1962, but keeping in view, that no duty liability was involved and appreciating the reasons given by the assessee, the confiscation of the other imported goods or the barges and the imposition of penalty upon the appellants, would not be justified - appeal allowed - decided in favor of appellant. 2017 (11) TMI 788 Penalty u/s 112(b)(ii) of the CA, 1962 - non-payment of ADD - Section 28(4) of the Customs Act - Held that: - if duty, interest and penalty has been paid within 30 days of the issue of the SCN, then SCN is not sustainable - As it is admitted fact that the entire duty, interest and 15% penalty has been paid by the main party and the proceedings has been dropped, the co-appellant can’t to be penalized - penalty set aside - appeal allowed - decided in favor of appellant. 2017 (11) TMI 787 Classification of imported goods - Toraymyxin Single Unit Cartridge (Dialyser Blood Filter) - classified under CTH 9018 90 31 or under CTH 8421 29 00? - Held that: - the item is used to medically treat sepsis. The item is also called ‘endotoxin removal catridge (Toraxymin)’ - the subject item is in the category of bloodfiltration or haemofiltration item/instrument. Therefore, within the same chapter heading, its right classification appears to be CTH 9018 90 33, which covers Haemofiltration instruments - the item is to be classified under CTH 9018 90 33 - appeal dismissed - decided against Revenue. 2017 (11) TMI 786 Misdeclaration of value - Glass Chatons/stones - the goods were undervalued, when compared with the imports through Mumbai Customs and NIDB data - Held that: - the subject goods are to be classified as glass beads under Customs Tariff Heading 7018 10 20. The Revenue has not given any substantial material and evidence to differ from the finding given by the Commissioner (Appeals) in the impugned order in appeal - The impugned order-in-appeal further, analyses the valuation aspect in detail and conclude that the Department did not produce any evidence to reject the transaction value in the present case. The impugned order arrives at the finding that the order passed by Additional Commissioner enhancing the assessable value is not fair and legal and transaction value declared by the importer is true transaction value. The Department has not given any further evidence to substantiate that the respondent misdeclared the description and value of the goods. There is no convincing ground given by the Revenue to reject the transaction value declared in the import documents by the respondent importer - appeal dismissed - decided against Revenue. Corporate Laws 2017 (11) TMI 785 Rejecting the proposal submitted by the petitioner on the OTS policy - accepting one time settlement as submitted by the petitioner after winding up order was passed - Held that:- From perusal of the record, it reveals that respondent NO.2 has extended the facility of ICD to the petitioner of the different amount. The petitioner-company could not repay the said amount to respondent No.2- Corporation in time. Respondent No.1/State has framed one time settlement policy. As per the said policy, the petitionercompany has offered his proposal for one time settlement. The said proposal was not accepted by respondent No.2 saying it is not in accordance with the OTS policy. On 02/05/2008 respondent No.2-Corporation filed a company petition before the Delhi High Court for winding up of the company on account of non-payment of dues. During pendency of the company petition, offer was again made to settlement the dues under the OTS policy, but, finally it failed as respondent No.2 refused to adjust the amount of ₹ 50 lakh which was paid to respondent No.2 by the petitionercompany. Thereafter the Delhi High Court passed an order for winding up of the company on 03/05/2013 The Delhi High Court in its order after exploring the possibilities of settling the dues as per OTS policy was of the view that the settlement is not possible on account of the fact that already numerous opportunities was made available to the petitioner-company to comply with the requirement of OTS amount offered by respondent No.2. The Delhi High Court has, therefore, held that the case is made out and, therefore, appointed provisional liquidator for petitionercompany. The order passed by the Delhi High Court was affirmed by Hon'ble the Apex Court in SLP vide order dated 26/09/2016. Thus, the order passed by the Delhi High Court in company petition has attained finality. After dismissal of the SLP, the petitioner has again submitted a proposal for settlement of the amounts. The said proposal was rejected by the respondents vide order dated 29/10/2016. The State Government thereafter has revised the OTS policy and stated that the OTS policy dated 16/05/2007 would be operational till 30/06/2017. Accordingly, the petitioner again submitted proposal on 29/05/2017 which was rejected by respondent No.2 in its meeting dated 20/06/2017. As per the settlement of respondent No.2, the total dues against the petitioner as on 31/05/2017 is 172.40 crores. As the order passed by the Delhi High Court in company petition was affirmed up to the Apex Court and as there is no statutory provision for accepting one time settlement as submitted by the petitioner after winding up order was passed, respondent No.2 has rightly rejected the proposal submitted by the petitioner-company. 2017 (11) TMI 783 Restore the electrical connection of the ‘Corporate Debtor’, if the amount towards consumption of electricity due since the date of moratorium (17.01.2017) till September, 2017 is paid - Held that:- We allow the (Interim) Resolution Professional (IRP) to pay the charges due to respondent towards consumption of electricity since the date of moratorium i.e. 17th January, 2017 till September, 2017. If such amount is deposited, the respondent will restore the electrical connection within 48 hours from the date of receipt of amount to ensure that the company remains on going and functional. On such restoration of such electricity, the IRP on behalf of the ‘Corporate Debtor’ will also pay month to month charges towards consumption of electricity failing which it will be open to the respondent – Maharashtra State Electricity Distribution Company Limited to take appropriate steps. We make it clear that the Corporate Debtor or Resolution Professional are not liable to pay the dues of period prior to passing of order of moratorium, which can be considered at the time of payment of dues to the creditors (Resolution Plan). 2017 (11) TMI 781 Oppression and mismanagement - Conducting the affairs of R1 Company prejudicial to the interest of the Petitioners - Whether or not increase of authorized share capital is prejudicial to the interest of the Petitioners? - Held that:- Since these Respondents held Board Meeting without calling one of the directors representing majority of the shareholding of the company and general meeting was held without any notice to the Petitioners for increase of authorized share capital, the increase happened in the EOGM held on 28.11.2013 is hereby held as invalid. Moreover, though it has been categorically mentioned u/s 172 of the Companies Act, 1956, every notice shall specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted there at by sending it 21 days before the date of meeting, sending of calendar of events not giving particulars, place and the day and hour of the meeting and the statement of the business to be transacted as mentioned u/s 172 would never become a notice u/s 172 of the Companies Act, 1956. Whether or not bringing an outsider as a shareholder is in violation of the Articles of Association and constitution of Private Limited Company? - Held that:- A separate sub-section has been carved out as section 81(1A) saying that if such shares are proposed to be offered to any person/s, whether or not those persons are covered under sub-section 81(1), a special resolution has to be passed for allotting those shares to a person other than the persons covered under sub-section 81(1). Of course, under sub-section 81(3), it has been said that this proposition is not applicable to a private limited company. But, for it has been specifically incorporated in the Articles of Association of this company that it requires to pass special resolution, if shares are allotted to an outsider, application of section cannot be found fault with, but for doing the same, the company has to mandatorily follow that procedure. That being the scenario, for allotment of shares to R5, the company ought to have passed a special resolution for allotment of shares to R5, since it is the case of the respondents that shares were allotted to R5 in a Board Meeting held on 14.12.2013 allotting 18,16,158 shares to R5 at par, it can never be an allotment as stated under section 81(1)(A) of the Act 1956. The blunder that has committed by the company is, R5 being an outsider, first shares should not have been issued, if at all any such issue has happened for Articles permitting such allotment of rights issue subject to section 81(1A), the company ought to have passed a special resolution for allotment of shares to R5. For no such special meeting was held and no such special resolution was passed, allotment of shares to R5 is not only bad in law for it has reduced the shareholding of majority to abysmally low, it is prejudicial to the interest of the Petitioners. Thereby allotment to outsider is hereby held as invalid. Whether or not allotment of shares to Respondent Nos. 2, 3 and Respondent No. 5 is prejudicial to the interest of the Petitioners? - Held that:- If really the case of the Respondents is, the Petitioners not responding to the offer, allotment should have been done on premium, without taking valuation into consideration, without giving an opportunity to the existing shareholder, if any allotment is made at par, it could only be understood that allotment is for the gain of the persons getting shares at the cost of dilution of shareholding of other shareholders, here it is the Petitioners. The ground the respondents raised for allotment of shares is that the company needs fund to carry on the functioning of the company. But the ground of necessity of funds cannot become a ground to avoid issuing notice to the petitioners, by seeing the conduct of the Respondents; it appears that the intention of the respondents is primarily for diluting the shareholding of the P1. In view of the reasons aforementioned the allotment made to R2 and R3 is bad in law and prejudicial to the interest of the Petitioners. Whether or not removal of P2 as director of the company u/s 283(1)(g) of the Companies Act, 1956 is prejudicial to the interest of P1? - Held that:- Unless and until all these details are given, proof is placed, the Board of Directors are not supposed to invoke Section 283 to arbitrarily terminate the office of the Director under the cover of section 283(l)(g). By seeing this exercise made by these Respondents, it appears fraud is writ at large in removing the Petitioner as director of R1 company henceforth we hereby hold that such removal is bad in law. Accordingly, this Bench hereby declares holding of such meeting is bogus because the date of meeting in the notice purportedly sent to P2 is different from the date shown in Form-32, therefore Form 32 filed showing P2 vacated office as invalid. There is an argument saying that removal of director will not become a complaint in the case of oppression and mismanagement, but in a case like this, where P2 has been appointed as representative of P1 to protect the interest of P1, especially in a company like this where only two shareholders are present, it cannot be brushed away saying it is a directorial compliant when a director representing majority shareholding is removed as director. Whether or not appointment of R5 as director of the company is prejudicial to the interest of the Petitioners? - Held that:- The company being private company, for there being no valid notice to the petitioners, especially to P2, in appointing R5 as director, appointment of R5 as director of the company, his appointment as director is also declared bad. Whether alteration of Articles of Association by Respondents 2-4 is prejudicial to the interest of the Petitioner No. 1 or not? - Held that:- For this Bench having already held that holding an extra ordinary general meeting on 28.11.2013 without notice to P1 is invalid, the alteration of Memorandum of Association and Articles of Association in said meeting automatically would become invalid, therefore, alteration of Memorandum of Association and Articles of Association is hereby declared as invalid and prejudicial to the interest of P1. Whether this Bench has jurisdiction to pass orders under 1956 Act? - Held that:- Accordingly, this point is decided that these proceedings are bound by 397-398 of Companies Act, 1956 but not by Companies Act, 2013. In view of the reasons aforesaid given, we hereby hold that the conduct of respondents in dealing with the affairs of R1 Company is oppressive against the Petitioners and prejudicial to the interest of P1, therefore, by invoking section 402 of the Companies Act, 1956. 2017 (11) TMI 780 Insolvency procedure - whether the word “may” employed in Section 7(5)(a) of Insolvency & Bankruptcy Code, 2016 can be stretched to invalidate the purpose and object of the Section 7 of the Code or not? - SARFAESI proceeding - Held that:- Generally, the word “may” or the word “shall” cannot be used to go against the mandate of the Section - mandate is if debt and default is ascertained, if other conditions are fulfilled, then the petition has to be admitted. If that is so, the Adjudicating Authority is limited to see and to all conditions requisite for admitting the petition have been set out or not. That being so, can it be said that the petition need not be admitted for some other reason that is not envisaged either under the respective section or the code? To my knowledge, it can’t be so. Thus whether SARFAESI proceeding or a provision of SARFAESI Act can be worked into Section 7 of the Code to say that admission of Section 7 petition will amount to public mischief. I fear, not. Normally the word “shall” and “may” are construed imperatively Lord Brougham in Queen v. Allooparao [1847] 3MLA 488 P 492, it has been held “if the words are it “shall and may” be so and so done, by such and such officer and body then the word “may” is held in all soundness of construction to confer, a power but the word “shall” is held to make that power, or the exercise of that power compulsory.” Insolvency & Bankruptcy Code operates in the following manner: 1. Notwithstanding clause under Section 238 of the Code will have effect on any other law inconsistent with the provisions of the Code, SARFAESI Act also being an Act dealing with creditor and debtor relation and operation of law in both the enactments being on the same field, Insolvency & Bankruptcy Code will prevail over SARFAESI Act. 2. Section 14 having categorically mentioned that declaration of moratorium will prohibit enforcement of security interest created by the Corporate Debtor in respect of its property including any action under SARFAESI Act, 2002, it can’t be said that sale in progress will not remain under suspension during the moratorium period. As already said sale is not concluded because full payment is not made till date and confirmation has not been given as prescribed under sub Rule 6 of Rule 9 of Enforcement Rules, which are notified taking power from Section 13 of SARFAESI Act which is meant for enforcement of security interest. Insolvency & Bankruptcy 2017 (11) TMI 784 Association of workmen as impleaded in the case u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Held that:- Having regard to the fact that after the impugned order being passed, the Adjudicating Authority has already admitted the application under Section 9, as informed by the appellant, we are not inclined to interfere with the impugned order. However, we are of the view that after admission of the application for initiation of Corporate Insolvency Resolution, against the appellant, the association of workmen have no role to play except their members, individually may file claim, the Insolvency Resolution Professional, who is required to proceed in accordance with the provisions of I & B Code. The appeal stands disposed of with the aforesaid observations. However, this order will not come in the way of the aggrieved person to challenge the order of admission of the application under Section 9 of the I & B Code. 2017 (11) TMI 782 Corporate insolvency procedure - ‘Advocate/Lawyer’ or ‘Chartered Accountant’ or ‘Company Secretary’ eligibility to issue notice under Section 8 of the I&B Code - Held that:- In view of provisions of I&B Code, read with Rules, as referred to above, we hold that an ‘Advocate/Lawyer’ or ‘Chartered Accountant’ or ‘Company Secretary’ in absence of any authority of the Board of Directors, and holding no position with or in relation to the Operational Creditor cannot issue any notice under Section 8 of the I&B Code, which otherwise is a ‘lawyer’s notice’ as distinct from notice to be given by operational creditor in terms of section 8 of the I&B Code. In the present case as an advocate/lawyer has given notice and there is nothing on record to suggest that the lawyer has been authorised by ‘Board of Directors’ of the Respondent – ‘DF Deutsche Forfait AG’ and there is nothing on record to suggest that the lawyer hold any position with or in relation with the Respondents, we hold that the notice issued by the lawyer on behalf of the Respondents cannot be treated as a notice under section 8 of the I&B Code and for that the petition under section 9 at the instance of the Respondents against the Appellant was not maintainable. See Uttam Galva Steels Limited v. DF Deutsche Forfait AG & Anr. – Company Appeal (AT) (Insolvency) [2017 (8) TMI 1198 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] In effect, order(s), if any, passed by Ld. Adjudicating Authority appointing any ‘Interim Resolution Professional’ or declaring moratorium, freezing of account, if any, and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement, if any, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the I&B Code, 2016 is dismissed PMLA 2017 (11) TMI 779 Bail application - offence u/Sections 3 4 of the Prevention of Money Laundering Act, 2002 - mmunity to the appellant from prosecution for an offence of money laundering - nature of offence - Held that:- The fact that no limit for deposit was specified, would not extricate the appellant from explaining the source from where such huge amount has been acquired, possessed or used by him. The volume of demonetized currency recovered from the office and residential premises of the appellant, including the bank drafts in favour of fictitious persons and also the new currency notes for huge amount, leave no manner of doubt that it was the outcome of some process or activity connected with the proceeds of crime projecting the property as untainted property. No explanation has been offered by the appellant to dispel the legal presumption of the property being proceeds of crime. Similarly, the fact that the appellant has made declaration in the Income Tax Returns and paid tax as per law does not extricate the appellant from disclosing the source of its receipt. No provision in the taxation laws has been brought to our notice which grants immunity to the appellant from prosecution for an offence of moneylaundering. The argument of the appellant that there is no allegation in the chargesheet filed in the scheduled offence case or in the prosecution complaint that the unaccounted cash deposited by the appellant is the result of criminal activity, will not come to the aid of the appellant. That will have to be negatived in light of the materials already on record. The possession of such huge quantum of demonetized currency and new currency in the form of ₹ 2000/notes, without disclosing the source from where it is received and the purpose for which it is received, the appellant has failed to dispel the legal presumption that he was involved in moneylaundering and the property was proceeds of crime. Therefore, we are not inclined to interfere with the well considered opinion of the Sessions Court and the High Court rejecting the prayer for grant of regular bail to the appellant. However, considering the fact that the appellant is in custody since 28th December, 2016 and the offence is punishable with imprisonment for a term extending to seven years only, but not less than three years, the Trial Court will be well advised to proceed with the trial on day today basis expeditiously. We clarify that the Trial Court must examine the evidence/material brought on record during the trial on its own merit and not be influenced by the observations in this decision which are limited for considering the prayer for grant of regular bail. Service Tax 2017 (11) TMI 776 Exemption from levy of service tax on import of services - interpretation of statute - reverse charge transaction - reimbursements made over to service providers - the decision in the case of Coastal Gujarat Power Ltd Versus Commissioner of Service Tax, Mumbai-I [2016 (12) TMI 229 - CESTAT MUMBAI] contested - Held that: - delay condoned - appeal admitted. 2017 (11) TMI 775 Banking and Other Financial Service - services received by the appellant from the foreign collaborator - Rule 6(5) of the Cenvat Credit Rules, 2004 - Held that: - all the issues such as revenue neutrality, period of service and limitation has to be considered in the facts of the present case, which have not been considered - As regard the revenue neutrality even though the Cenvat credit is available to the appellant, the fact that during the relevant period appellant were discharging excise duty/service tax in cash to the extent equal to the service tax liability raised in the present case. Whether the service qualifies as input service etc - Since the adjudicating authority has not verified the factual aspect of the above issues raised by the appellant, matter needs to be remanded to the adjudicating authority - appeal allowed by way of remand. 2017 (11) TMI 774 Reverse charge mechanism - receipt of services - in course of raising fund ECB and FCCB appellant are receiving services of various service provider based outside country like Merchant Bankers, Lead Manager, Advisors, Financial Advisors, Principle Agent, Legal Advisors, Management Consultant, Underwriters etc. - Revenue neutrality - Held that: - Ld. Commissioner did not deal with the issue of Revenue neutrality in detail and the same was rejected on the ground that there is suppression of facts, hence the case does not fall under the Revenue neutrality. Whether the service on which service tax is payable and claimed as input service is admissible input service in terms of Rule 2(l) of Cenvat Credit Rules, 2004, whether appellant cleared/provided exempted goods/service etc. therefore in absence of examining all these factual aspect revenue neutrality can neither be rejected nor be allowed. Since these factual aspects have not been examined by the adjudicating authority, in the interest of justice, it is desirable to remand the matter to the adjudicating authority. Appeal allowed by way of remand. 2017 (11) TMI 773 Rent-a-Cab services - scope of the term 'renting' and 'hiring' - Andhra Pradesh State Road Transport Corporation (APSRTC), the appellants herein, are engaged in operation of buses in the State of Andhra Pradesh for travelling public. They were also providing buses for marriage functions, pilgrimage places etc. to private persons on commercial consideration. Held that: - under the rent-a-cab scheme, the hirer is endowed with the freedom to take the vehicle, wherever he wishes, and he is only obliged to keep the holder of the licence informed of his movements from time to time. When a person chooses to hire a car, which is offered on the strength of a permit issued by the Motor Vehicles Department, then the owner of the vehicle, who may or may not be the driver, will offer his service while retaining the control and possession of the vehicle with himself. The customer is merely enabled to make use of the vehicle by travelling in the vehicle. In the case of a passenger, he is expected to pay the metered charges, which is usually collected on the basis of the number of kilometers travelled. These are all matters, which are regulated by the Government. Unlike the said scenario, in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring. Though both, rent and hire, may, in a different context, have the same connotation; in the context of rent-a-cab scheme and hiring, we are of the view that they signify two different transactions. What the lawgiver has chosen fit to tax by way of imposition of Service Tax is only transaction relating to business of renting of cabs. It is also pertinent to bear in mind that, in the case of hiring, the hirer may refuse to provide the service to the prospective customer. We cannot accept the argument of the learned counsel for the appellant that the Court must ignore the provisions of Section 75 of the Motor Vehicles Act. We are of the view that, when the lawgiver introduced this new source of taxation, it must be treated as having been aware of the distinct concept of renting a cab for which there is provision in the Central Legislation, namely, Section 75 of the Motor Vehicles Act and also a scheme stood framed as early as in 1989. We are, therefore, of the view that, unless there is control, which is passed to the hirer under the rent-a-cab scheme, there cannot be a taxable transaction under Section 65(105)(o), read with Section 65(91) of the Service Tax Act. Reliance placed in the case of Commissioner of Customs & Cx Meerut Vs. R.S. Travels, [2014 (10) TMI 817 - UTTARAKHAND HIGH COURT] where the Hon’ble High Court reiterated that when there is only a contract of hire and there is no renting of cab, there is no question of assessee being assessed in respect of services rendered in connection with rent-a-cab service. There cannot be any tax liability on the appellants till 30.06.2012, in respect of hire charges received by them for providing buses for marriage functions/pilgrimages. Accordingly, the relevant portions in these impugned orders, as applicable, where the service tax liability has been upheld in respect of these activities of the appellants till 30.06.2012, will require to be set aside which we hereby do. Coming to the period from 01.07.2012 all services unless specifically mentioned in the negative list or otherwise, specifically exempted are liable to discharge service tax - for a vehicle having “stage carriage” permit like buses owned by the appellants, to operate for private persons/marriage parties under a contract, such buses will then necessarily be required to obtain a contract carriage permit or a special permit as aforesaid. In our view, once such a contract carriage permit or a special permit is obtained, the bus will then no longer have the character of a stage carriage but will instead acquire the colour of a contract carriage/special permit carriage. Viewed in this light, the buses of the appellants having become “contract carriage or a special permit carriage even if for temporary permit to provide them on hire for marriages/pilgrimage etc., they cannot be considered as a stage carriage for that short period and hence cannot then claim to be covered under the negative list of services as a stage carriage for transportation of passengers, or for that matter, covered by the exemptions provided under notification 25/2012, since that exemption will not cover contract carriage on hire - the demand of service tax in all these appeals for the period from 01.07.2012 onwards is justified by law. Penalties - Held that: - considering that the matter is one of interpretation and that the question of taxability on the services was mired in confusion and litigation, the penalties imposed in all these cases are set aside. Appeal allowed in part. Central Excise 2017 (11) TMI 772 Alternative remedy of appeal - Section 35H of the Central Excise Act, 1944 - the decision in the case of The Commissioner Central Excise and Customs, Aurangabad Versus M/s. India Containers Ltd., Shri Alex Rodriguez, Shri. A.M. Kulkarni, V.D. Bindu [2017 (7) TMI 94 - BOMBAY HIGH COURT] contested - Held that: - recovery of penalty shall remain stayed - Issue notice. 2017 (11) TMI 771 Condonation of delay in filing appeal - the decision in the case of M/s Shakti Tubes Limited. Versus CCE, Patna [2017 (7) TMI 556 - CESTAT KOLKATA] contested - Held that: - delay is condoned - appeal admitted. 2017 (11) TMI 770 100% EOU - refund of unutilized CENVAT credit - Held that: - the certificate issued by the CA as well as the CENVAT credit register clearly shows that the figure shown in the ER returns is wrong and the appellant has filed the refund claim of ₹ 33,79,759/- and he has already reversed the credit of ₹ 34,43,095/- - the appellant has given proper explanation of this discrepancy - the impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant - decided in favor of appellant. 2017 (11) TMI 769 CENVAT credit - Revenue's main case is based upon the statement of Shri S.K.Gupta, Proprietor of M/s. M.K.Steels. Admittedly, the said Shri Gupta was not presented for cross-examination or for examination in chief by the Commissioner - cross-examination - Held that: - The Tribunal in the case of Commr. Vs. Kuber Tobacco India Ltd. [2016 (4) TMI 622 - CESTAT NEW DELHI] held that Adjudicating Authority is first required to examine the deponent of the statement and there after cross-examination is required - In the absence of such cross-examination and examination in chief, the statement on which the Revenue seeks to rely, have to be excluded from evidence. The appellants have made payment to Shri S.K.Gupta by cheques. Apart from the statement of Shri S.K.Gupta that such cheques were subsequently encashed by him and the amounts were returned to the appellants, there is virtually no evidence to establish the said fact. Revenue has not investigated the matter with the banks and has made no efforts to establish that the cheque payments made to M/s. M.K.Steels as consideration for the bought out inputs were received back by the appellants in cash. I also note that Shri S.K.Gupta apart from making bald statement that the amounts were returned to the assessee through broker, who was given 1% commission has given no further details. There is nothing on record to establish the said transactions. Appeal allowed - decided in favor of appellant. 2017 (11) TMI 768 Manufacture - whether the activity of appellant is same as of Ankleshwar Unit - Held that: - the activity of Ankleshwar Unit and the appellants unit are the same such as purchase of short length of bare copper wire enameling the said wire with their final product i.e., varnish. If this be so, then the Tribunal's order passed in respect of Ankleshwar Unit is squarely applicable, as per the direction given by this Tribunal in the first round of appeal - Since the matter has already been considered by this Tribunal and passed the remand order with specific direction, no other issues can be raised by either side, therefore the adjudication order which has gone on all other aspects and various judgements cannot be sustained - appeal allowed - decided in favor of appellant. 2017 (11) TMI 767 Reversal of CENVAT credit - inputs used in the manufacture of semi finished foods (WIP Goods) destroyed in fire along with the inputs, lying on the shop floor of the factory - incidence of fire in the factory premises of the appellant - Held that: - The contention of the Revenue that the appellant is required to reverse the credit on the inputs contained in semi- finished goods in accordance with Rule 3(5B) of Cenvat Credit Rules, 2004, in my view, is an erroneous approach and misreading of sub Rule 5B of Cenvat Credit Rules, 2004, inasmuch as, the said sub Rule is directed when the inputs or capital goods before being put to use is written off from the books of accounts, whereas in the present case, the inputs after being used and contained in the semi finished goods destroyed in fire during the course of its journey to the final stage, hence cannot be equated to the activity of written off of the credit on said inputs - appeal allowed - decided in favor of appellant. 2017 (11) TMI 766 CENVAT credit - capital goods which were later removed to their another unit engaged in their job work, without following any procedure laid down under CCR, 2004 - Held that: - The CENVAT Credit Rules, 2004 specifically provides for such eventualities/situation whereunder inputs/ capital goods can be removed from the factory for job work and in the event, the inputs/capital goods are not returned within the period of 180 days, the assessee is required to reverse the cenvat credit - In the present case, even though, the capital goods on which credit had been availed were removed by the appellant, the same were not received in their factory premises even after lapse of 180 days from the initial date of removal. In these circumstances, the appellant is required to reverse the credit on the said capital goods. The Appellant had immediately after installing the capital goods, removed the same year under Chits and without following any procedure, whereas for clearance of inputs for job-work they prepared annexure-II challans and followed the laid down procedure. Therefore, imposition of penalty is justified. Considering the facts and circumstances, I do not find any reason to impose penalty on Shri Manoj Joshi under Rule 15 of the CCR. Accordingly, the appeal filed by the Sh. Manoj Joshi is allowed. Appeal allowed in part. 2017 (11) TMI 765 CENVAT credit - 4% Additional Customs Duty (SAD) - It is the contention of the Department that 4% SAD paid on such imported goods without its receipt and use in the factory premises is not admissible as credit to the Appellant. Held that: - even though appellant have sold the goods on its import from the place import itself, by raising commercial invoice, but they have intentionally and knowingly manipulated the records making false entry in the RG 23A part I and Part II showing its receipt and also prepared issue slips, allotting chit numbers so as to indicate that the same had been used in the factory - such manipulations of the record, cannot in any circumstances be considered as an intention not to avail the CENVAT credit, which is inadmissible to them, but an innocent belief of the Budget speech of the Finance Minister - Also, the eligibility of refund of 4% SAD paid on selling of the imported goods as such after 14.9.2007, subject to the fulfillment of the condition laid down in the said Notification would not come to the rescue to the Appellant. Appeal dismissed - decided against appellant. 2017 (11) TMI 764 CENVAT credit - whether the appellant after discharging 10% of the value of the exempted products for the quarter 01.04.2008 to 30.6.2008 can choose/opt to follow the alternate option of reversal of Cenvat Credit availed on inputs attributable to exempted products for the remaining period of nine months ie., from 01.07.2008 to 31.03.2009? Held that: - Sub Rule (3)of Rule 6 of CCR, 2004 reveals that an assessee shall follow either of the options as applicable to him prescribed under Clause (i) or clause (ii) of Sub Rule (3) of the said Rule(s) of Cenvat Credit Rules 2004. The explanation-I appended to the said Sub Rule makes it clear that once the assessee avails any of the options ie., to pay 10% of the value of the exempted goods or reversal of proportionate Cenvat Credit availed on inputs attributable to manufacture of exempted goods, subject to the conditions and procedures laid down under Sub Rule (3A), the same cannot be altered in a given financial year - In the present case, the appellant availed the option by discharging 10% of the value of the exempted products for the initial quarter ie., from 01.04.2008 to 30.6.2008 for which no procedure has been prescribed for exercising such option, whereas to follow reversal of proportionate Cenvat Credit on inputs availed and attributable to exempted products, the detailed procedure is prescribed under Sub Rule 3A of CCR, 2004. Therefore, the appellant once exercised its option for the first quarter by discharging 10% of the value of the exempted products, they cannot switch over to the second route/option of reversal of proportionate credit availed on inputs attributable to exempted products, during the same financial year. Penalty - Held that: - the demand has been issued for the normal period of limitation and the amended Rule was inserted with effect from 01.04.2008, therefore, initial non-compliance should be viewed leniently - imposition of plenty ₹ 3,00,000/- appears to be too harsh - penalty reduced to ₹ 10,000/-. Appeal allowed in part. 2017 (11) TMI 763 Irregular availment of CENVAT credit - capital goods - whether Modvat Credit of ₹ 38,53,942/- on capital goods with interest and penalty is recoverable from the appellant M/s SKPYL and consequent confiscation of seized capital goods, plant and machineryas directed be confirmed and penalty on other appellants be upheld? Held that: - Even though, in the subsequent statement of the Director Shri. Tayal, it has been stated that those capital goods were removed from the factory to be installed for repairing purpose at M/s SKPL, however, no corroborative evidence was placed to substantiate the claim furnishing the details of repairing to be carried out and the difficulty of its repairing in the premises of the appellant M/s SKPYL. Therefore, the plea of the appellant that it were cleared for repairing cannot be acceptable - No contrary evidence has been placed by the appellant to rebut the said finding in their present Appeals before this forum. Time limitation - Held that: - the evidence brought on record revealed that the capital goods were installed in the premises of M/s SKPL through solid foundations. Accordingly, the demand with interest has been rightly issued and confirmed invoking larger period of limitation against M/s SKPYL. Confiscation of capital goods, on which credit availed at M/s SKYPLbut found in the premises of M/s SKPL - Held that: - confiscation do not sustain as removal of the duty paid capital goods without intimation to the department, cannot make the capital goods non-duty paid and offending one, inviting confiscation of the same. Penalty - Held that: - the penalty equal to the credit wrongly availed imposed on them is justified - the penalty imposed on M/s SKPL and Sh. Tayal, Director appears to be too harsh, and in the interest of Justice, it is reduced to ₹ 2.00 Lakhs and ₹ 1.00 lakh, respectively. Appeal allowed in part. 2017 (11) TMI 762 CENVAT credit - Round Bars/ H.R. Plates/ M.S. Channels / M.S. Angles/ Parallet Falnge Coloumns/ Non Alloys Steel etc.used in fabrication and supporting structure of the capital goods within the factory - Held that: - the Principal Bench at Delhi in Singhal Enterprises Pvt. Ltd's [2016 (9) TMI 682 - CESTAT NEW DELHI] in laying down the principle on the eligibility of credit on similar items in its use as structural support to capital goods has held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. The Appellant should establish the said use by adducing evidences - appeal allowed by way of remand. 2017 (11) TMI 761 Liability of interest - Provisional assessment - whether interest is leviable/payable under Rule 7(4) of Central Excise Rules, 2002 immediately from next month to the provisional assessment directed by the department or after finalization of the provisional assessment on determination of the duty? Held that: - In sub Section (3) of Section 18 of the Customs Act,1962 it is clearly laid down that interest would be payable after the provisional assessment is directed, whereas under sub Rule (4) of Rule 7of Central Excise Rules,2002 the interest would be attracted only on determination of duty i.e. the when the duty paid initially by way of provisional assessment, determined through final assessment - appeal allowed - decided in favor of appellant. 2017 (11) TMI 760 Clearance of iron waste & scrap without payment of duty - whether clearance of Iron waste and scrap after 16.06.2005 alleged to be generated out of capital goods on which CENVAT Credit availed, be subjected to duty on its transaction value or otherwise? - Held that: - a plain reading of Rule 3(5A) of CCR, 2004, inserted w.e.f. 16.06.2005 makes it clear that waste and scrap of capital goods on which CENVAT credit has been availed, if cleared from the factory then the manufacturer shall pay an amount equal to the duty leviable on the transaction value of the waste and scrap. The said rule would come into play only when the capital goods credit had been availed by the assessee and later waste and scrap arose out of the said capital goods. In the present case though the appellant has been vehemently arguing that they had received capital goods prior to 1994 and the worn machines/parts were removed as waste and scrap, the said facts had not been verified - matter is remanded to the original adjudicating authority to verify the evidences placed by the appellant before this forum and other evidences - appeal allowed by way of remand. 2017 (11) TMI 759 CENVAT credit - input service - Man-power supply service - N/N. 30/2012-ST dated 20.06.2012 - Held that: - the appellant though required to pay 75% of the service tax liability, on receiving the man-power supply service from the service provider, however, initially the entire amount of service tax was paid by the service provider and later recovered from the appellant by indicating the same in the invoice - the amount which the service provider paid whether to be consider as a deposit or service tax for deciding the eligibility of credit has been more or less settled by the Hon’ble Gujarat High Court in Nahar Granites Ltd. [2014 (5) TMI 57 - GUJARAT HIGH COURT], where it was held that the amount of service tax paid by the service provider cannot be considered as a deposit - appeal allowed - decided in favor of appellant. 2017 (11) TMI 758 CENVAT credit - waste and scrap - Iron and scrap generated out of the capital goods installed in the factory - Whether clearance of Iron waste and scrap after 16.06.2005 alleged to be generated out of capital goods on which CENVAT Credit availed, be subjected to duty on its transaction value or otherwise? - Held that: - No doubt the onus lies on the department to establish that the waste and scrap did arise out of the capital goods on which credit availed, but, in the present case, the evidences adduced by the appellant in establishing the fact no CENVAT credit had been availed on plant and machinery, cleared as waste and scrap, needs to be verified, before confirming the duty on transaction value of waste and scrap under Rule 3(5A) of CCR,2004 - appeal allowed by way of remand. 2017 (11) TMI 757 SSI Exemption - case of Department is that both the factories were wrongly availing SSI exemption by clearing goods clandestinely without payment of duty - cross-examination of witnesses - Held that: - the learned Commissioner had initially permitted the cross examination of the witness sought by the appellant. It is also on record that the two panch witnesses were also cross examined and their statements recorded before the adjudicated authority. However, after taking over of a new officer as Commissioner, the cross examination of the rest of the witnesses was disallowed. The impugned order needs to be set aside and matter remanded to the adjudicating authority. For satisfying the requirements prescribed 9D ibid opportunity for examination and cross examination of witnesses may be extended through an effective hearing to all connected parties - appeal allowed by way of remand. 2017 (11) TMI 756 Duty Drawback - All Industry Rate - M/s FIL claimed the AIR at higher rate by claiming that the export goods were made without claiming such credit - Held that: - Revenue has not brought any other evidence to establish that the export goods were procured through other invoices on which credit was availed. Moreover the AIR was sanctioned and paid by Customs authority at the port of export. If Revenue is of the view that excess drawback has been paid, action for recovery has to be initiated by the jurisdictional Customs authority. The Central Excise authority has no jurisdiction to initiate such recovery - demand rightly dropped. CENVAT credit - bogus invoices - Held that: - the case of the Revenue has been built up almost entirely on third party evidence which also stands denied in cross examination. There is no admission by the appellants about the receipt of only invoices without accompanying goods. These facts are also not corroborated by any evidence recovered from the appellants. There is also no evidence found in the appellant’s documents which show their involvement in the matter - It is well settled position of law that demand cannot be made only on the basis of third party documents - credit remains allowed. Appeal allowed - decided in favor of assessee. 2017 (11) TMI 755 Clandestine removal - shortage of 2420 pieces of water closet - Irregular availment of Cenvat credit - clandestine removal of 6847 pieces of finished goods - Held that: - with regard to water closet, the objections raised by the appellant with reference to the procedure adopted is nothing but an afterthought. During the statements recorded from various connected employees of the appellant company, no one could give any explanation regarding the shortage of goods found - demand upheld. Irregular availment of cenvat credit on input services - Held that: - the transfer of credit from head office to the appellant unit cannot be held as irregular only for the reason that the head office has failed to take out registration aside. However before such credits are permitted, it will be necessary for the appellant to satisfy the Departmental authorities about the nature of services for which service tax has been paid so that the Department can verify whether such services fall within the definition of input service under rule2(l) of the Cenvat Credit Rules 2004 - matter placed on remand. Suppression of production and clandestine removal of 6847 pieces of finished goods - Held that: - After careful consideration of the invoices submitted by the appellant, it is concluded that these do not pertain to the goods and hence demand has been raised in the show cause notice - demand upheld. Part matter on remand and partly decided against appellant. 2017 (11) TMI 754 Adjustment of shortage of raw material and finished goods against excess found during stock taking - reversal of CENVAT credit - Held that: - identical issue has came up before the Tribunal in appellants own case for the earlier period M/s National Engineering Industries Ltd Versus Commissioner of Central Excise, Jaipur-I And Vica-Versa [2015 (10) TMI 1555 - CESTAT NEW DELHI], where it was held that While the whole discrepancy in physical stock has come to light only as per the stock taking conducted by the assessee, there is no allegation or evidence to the effect that the shortages/excesses are not attributable to accounting errors or complexities but are due to unaccounted clearances finished goods and consumption of raw material. In the absence of any such corroboration the assessee's plea on the non-sustainability of order reversing credit or demanding duty has strong force and is to be admitted - appeal allowed - decided in favor of appellant-assessee. 2017 (11) TMI 753 N/N. 67/1995 dated 16.03.1995 - Intermediate goods - Revenue held a view that the intermediate products, being in the negative list of area based exemption, is neither eligible for exemption under N/N. 50/2003 nor exemption for captive consumption under N/N. 67/95 as the final product is exempted - Held that: - the assertion in the impugned order regarding specific nature of inorganic compound was not been established by any chemical test - identical issue was decided in the case of ASSOCIATED PIGMENTS LTD. Versus SUPERINTENDENT OF CENTRAL EXCISE [1993 (6) TMI 91 - HIGH COURT AT CALCUTTA], where it was held that the classification of lead oxide grey will be under Chapter 38. As chapter 38 is not in the negative list for area based exemption under N/N. 50/2003, the confirmation of demand against the appellants is not sustainable - appeal allowed - decided in favor of appellant. 2017 (11) TMI 752 CENVAT credit - area based exemption - denial on the ground that the capital goods have been exclusively used for the manufacture of exempted goods - Held that: - appellant has enjoyed w.e.f. 03.12.2004 the benefit of area based exemption under notification no.49/03 & 50/03 dated 10.06.2003. Prior to that, the capital goods were installed and utilize, when the appellant was paying the duty and not availing the benefit of the area based exemption - Identical issue has come up before this Tribunal in the case of Cheema Papers Ltd. Vs. CC Meerut [2017 (6) TMI 468 - CESTAT NEW DELHI], where it was held that The fact that from a subsequent date i.e. 07.08.2003 the Appellants opted for and started availing area base exemption will not disentitle them to the Cenvat Credit already availed - appeal allowed - decided in favor of appellant. 2017 (11) TMI 751 Valuation - clearance of final product in packets of 25Kg - it was contended by appellant that the duty stands again paid by them on the 5kgs packages and there was no requirement to pay any duty on 25Kgs packings in terms of Section 4A of the Act - Section 4A of the Central Excise Act - Held that: - the Tribunal directions have not been carried out by the adjudicating authority in spirit and no efforts have been made by them to find out to whether 25Kg packages sold to M/s Bayer, required affixation of MRP under Weight and Measures Act. Similarly, there is no evidence produced by the Revenue that such 25kg packages are ultimately sold in retail either by the appellant or by M/s Bayer Crop Sciences, thus requiring affixation of MRP - The limitation aspect has not been examined from the Revenue neutrality angle - appeal allowed by way of remand. 2017 (11) TMI 750 Abatement of duty - Compounded Levy Scheme - Rule 9 of Tobacco Packing Machines Rules, 2010 - Held that: - admittedly the appellant have not done any production nor of any addition in machines during April, 2012. Accordingly, the appellant was required to deposit the duty, as it is case of addition of machines (as provided under Rule 9), the duty have been rightly paid before the 5th of the next month - On a harmonious reading of Rules 9 & 10 together under the admitted facts, there is proper compliance in taking suo motu abatement as the fact of the closer of the factory for a continuous of 15 days, was in the knowledge of the Revenue, as is evident from the Panchnama dated 16-4-2012 - there is no violation of provisions of Rule 10 of TPM Rules, 2010 - appeal allowed - decided in favor of appellant. 2017 (11) TMI 749 Refund claim - doctrine of unjust enrichment under Section 11B - Held that: - The appellant is a unit of Ministry of Defence. They have manufactured vehicles such as Shaktiman Trucks and supply the same for defence use. The bar of unjust enrichment will be applicable in those cases where the incidence of excise duty involved has been passed on to some other person - In the present case, it is obvious that the Ministry of Defence cannot pass on the incidence of duty to any other agency. Consequently, the refund will be payable in cash - appeal allowed - decided in favor of appellant. 2017 (11) TMI 748 Recovery of the amount paid by the insurance company as excise duty to the appellant - the appellant has received certain amount on account of excise duty on the capital goods lost in fire on 03.05.2008 and the duty has been demanded by invoking provisions of Section 11D (1A) of Central Excise Act, 1944 - Held that: - Admittedly, as per Section 3 of the Central Excise Act, 1944, duty is to be paid by the assessee on manufactured goods. The capital goods in question were never manufactured by the appellant. Therefore, in the hands of appellant the capital goods in question is not an excisable goods. As the goods in question are not excisable goods, therefore, provisions of Section 11D (1 A) are not applicable to the facts of this present case - demand not sustainable. The insurance company has given the claim as per the agreement between the appellant for replacement of capital goods lost in fire, which includes excise duty element. If appellant is purchasing capital goods they were required to pay excise duty thereon. Therefore, there is no double benefit as availed by the appellant. In that circumstance, the impugned order has no merits. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2017 (11) TMI 747 Levy of VAT - Entry Tax - sale of petroleum products - grievance of the Appellant in the present appeals is that when a sale is made to the OMCs, after payment of Entry Tax, VAT is not set off against the Entry Tax - Whether the second proviso to Section 3(2) of the Entry Tax Act is ultra vires to the Constitution? - Held that: - Since the set off in question depends upon the interpretation of Section 3(2) of the Entry Tax Act, it is necessary to state, at the outset, that certain conditions need to be satisfied for claim of set off - It will be seen that the tax leviable under the Entry Tax Act shall be paid by every dealer liable to pay tax under the VAT Act. Under Section 3(1) of the VAT Act, all persons who are registered dealers under the Bihar Finance Act, 1981, as it stood before its repeal, are liable to pay tax under the said Act on sales and purchases made by them. There is no dispute that the Appellant is a registered dealer under the Bihar Finance Act, 1981 and is thus liable to pay tax under the VAT Act - under Section 3(2) itself, the tax leviable by way of Entry Tax can only be paid by every dealer liable to pay tax under the VAT Act, this condition has been duty fulfilled. Second condition need to be fulfilled is, The set off can only be granted if the assessee is an importer of scheduled goods, who is liable to pay tax under the VAT Act - Held that: - the Appellant is an importer of scheduled goods, viz., petroleum products. Words and expressions that are not defined under the Entry Tax Act shall have the meaning assigned to them under the VAT Act - when a sale is effected by the Appellant to BPCL and HPCL, there is no levy of any VAT that is contemplated at this point. The VAT gets levied only at the next point in the chain of sales, which is the sale from BPCL and HPCL to their retailers and/or consumers. Thus, it is clear that the second condition is not fulfilled as the importer of the scheduled goods i.e. the Appellant is not at all liable to pay tax under the VAT Act. Third condition which is needed to be fulfilled is, The assessee must incur tax liability at the rates specified under Section 14 of the VAT Act - Held that: - there being no levy on the Appellant, the Appellant does not incur any tax liability at the rates specified under Section 14 of the VAT Act. Fourth condition need to be fulfilled is, This must only be by virtue of the sale of imported scheduled goods - Held that: - this must be by virtue of sale of the very imported scheduled goods, which means that the sale must be by the Appellant itself and not by the other OMCs. Fifth and last condition needed to be fulfilled is, His tax liability under the VAT Act will then stand reduced to the extent of tax paid under the Act - Held that: - This condition is also not met inasmuch as the set off is person specific and not goods specific, as is correctly contended by Shri Ganesh, learned Senior Advocate, appearing on behalf of the Revenue. On a literal reading of Section 3(2) second proviso, the Appellant would not be entitled to claim set off - the Appellant is a registered dealer under Section 3(1) of the VAT Act and would be a dealer liable to pay tax under the aforesaid Act within the meaning of the enacting part of Section 3(2) of the Entry Tax Act. However, it is clear that as importer of scheduled goods, the Appellant must be liable to pay tax under the VAT Act. As has already been found, the Appellant as an importer of scheduled goods is not liable to pay tax as the levy of tax is itself postponed when the Appellant sells the oil to another OMC, and VAT is leviable only on the transaction between the said OMC and its retailer or other customers. When it comes to taxing statutes, the law laid down by this Court is clear that Article 14 of the Constitution can be said to be breached only when there is perversity or gross disparity resulting in clear and hostile discrimination practiced by the legislature, without any rational justification for the same. - We must also not forget that no assessee can claim set off as a matter of right and the levy of Entry Tax cannot be assailed as unconstitutional only because set off is not given. The Appellant will approach the Appellate Tribunal with all relevant materials in this behalf, and the Appellate Tribunal will render a finding as to how much of the demand of Entry Tax for the assessment years in question would have to be struck down, in that sales made by HPCL and BPCL to their retail consumers and to others are made outside the local area of Patna. We give the Appellants 12 weeks time to approach the Appellate Tribunal with all details as aforesaid and request the Appellate Tribunal to render findings - petition allowed by way of remand. 2017 (11) TMI 746 Sales tax - entry tax - the respondent opined that the petitioner had not remitted the Sales Tax and they have paid only Entry Tax at 6% on the purchase of tractors - Whether the petitioner can be treated as a first seller of tractors inside the State of Tamil Nadu? Held that: - the presumption arrived by the Assessing Officer to treat the petitioner as the first seller of the tractor inside the State is mis-conceived. The description of entries found in the invoice should not be the sole guiding factor - the respondent did not endeavour to make any enquiry as to whether the M & M Ltd., have paid Sales Tax at 4% and surcharge at 5% on tax (totally at 4.2%) by way of adjustment under Section 4 (1) of the Tamil Nadu Tax on Entry of Motor Vehicles into the Local Areas Act 1990. Without resorting to such procedure, penalizing the petitioner is incorrect and not sustainable. Petition allowed - decided in favor of petitioner. 2017 (11) TMI 745 Bail application - input tax credit - petitioner is alleged to have floated 40 shell companies with a view to gain illegal input tax credit under the provisions of Gujarat Value Added Tax Act - The modus operandi alleged against the petitioner is to get registered the TIN number of certain entities on monthly remuneration to be paid to them - whistle blowing mechanism - Held that: - it is difficult to conclude at this stage that the petitioner accused had used the said material and there exists doubt as to whether the said material was being used by Mukesh Mehta to whom the premises were rented out by Geetaben, the owner of the premises. Therefore such recoveries prima facie do not constitute a credible information or reasonable suspicion qua the petitioner. Further except, as above, there is nothing on record to indicate that said house was possessed by the petitioner jointly with Mukesh Mehta. The respondent claims to have knowledge of dubious transaction as is evident from its affidavit. If that was so, nothing could have prevented it from coming out with incriminating material. There is also no material placed on record to substantiate the allegation about bogus billing. Not a single bogus bill is placed on record. It is not even pointed out as to how the goods or services were delivered by bogus billing. If the shell companies were said to be benefited by bogus billing, obviously, there would be exchange of bogus bill, challans or other similar documents. No such facts are substituted - It is also not pointed out as to which firms amongst the 40 shell companies were benefited by dubious billing and to what extent. Bail application is allowed and applicant is ordered to be released on bail. 2017 (11) TMI 744 Interpretation of Statute - Section 19(2) of the Tamilnadu Value Added Tax Act, 2006 - whether proviso to Section 19(2) of the Tamilnadu Value Added Tax Act, 2006, applies both to the registered dealers and manufacturers? - Held that: - if the request of the assessees/manufacturers is conceded, the revenue involved would be above ₹ 1000 Crores - we deem it fit to admit the writ appeal and grant interim stay of the impugned judgment - appeal admitted. Indian Laws 2017 (11) TMI 778 Charge under Sections 20 and 29 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - HC reversing the verdict of acquittal of the appellant by the Trial Court - seriousness of offence - Held that:- This Court concluded that the finding of innocence recorded by Trial Court was a reasonably possible view taken on the basis of the evidence and materials on record and thus the High Court ought not to have disturbed the same even if, on a re-appreciation of the evidence it was inclined to take a different view. This Court reiterated the oft quoted fundamental proposition that so long the view taken by the Trial Court in awarding acquittal on a criminal charge was a possible one, the exercise of the appellate power of the High Court under Section 378 of the Code would remain circumscribed by the well-settled parameters noticed hereinabove. The conviction of the appellant was set aside in the attendant facts and circumstances and his acquittal was restored. The Trial Court acquitted the appellant holding that the prosecution had failed to prove the charge beyond reasonable doubt. In the appeal, filed by the State, the High Court convicted and sentenced the appellant as above. The principal plea of the appellant before this Court was that the High Court had failed to appreciate that in absence of any independent witness, the evidence of the police witnesses ought to have been scrutinized with greater care and as the police witnesses had contradicted themselves about the authorship of the seizure memo, the arrest memo, consent memo and the NCB, no interference with the acquittal ought to have been made. The evidence of PW-4 and PW-6 was referred to for reinforcing the above assertion. The High Court in the attendant facts and circumstances, in our determination, erred in upturning the findings recorded by the Trial Court. The impugned judgment and order is thus set aside and the acquittal of the appellant is restored. This Court shares the concern expressed by the Trial Court on the shoddy investigation conducted in the case, having regard in particular to the seriousness of the offence involved and reiterate the direction issued by it to the Superintendent of Police, Kullu to enquire into the matter to ascertain the reason for the omission/lapses in the investigation, identify the person(s) responsible therefor and the action taken in connection therewith so as to ensure against repetition of such shortcomings in future 2017 (11) TMI 777 Arbitral Award - VENTURE seeks to have the AWARD set aside - failure to make disclosure would render the AWARD liable to be set aside - Held that:- Hon'ble Mr. Justice J. Chelameswar and Hon'ble Mr. Justice Abhay Manohar Sapre pronounced separate and dissenting judgments of the Bench comprising His Lordship and Hon'ble Mr. Justice Abhay Manohar Sapre, in these petitions. Leave granted in the SLPs. In terms of common signed reportable order, the Registry is directed to place the papers before Hon'ble the Chief Justice of India for appropriate further course of action.
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