Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 19, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Taxability of compensation received - nexus with professional activities - the said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961
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Chargeability of transfer of sale of know-how on sale of product information - whether that amounts to the transfer of right to manufacture, produce or process any article or thing where the cost of acquisition would be nil - Not taxable.
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Rate of commission on the business of providing accommodation entry - It is just and proper to estimate the average commission @ 0.30% (30 paise to ₹ 1 per ₹ 100) on credit entries appearing in the bank account of the assessee.
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Prior period expenses - It is not the case of the revenue that the expenses have been claimed twice but the short ground of disallowance is that since the expenses pertain to an earlier year, these expenses cannot be allowed. That approach is impermissible in law.
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Disallowance of ad-hoc basis for the expenses - There is no statutory provision prescribed under the Act to make the disallowance of the expenses at the same rate at which these were disallowed in the preceding assessment years on year to year basis.
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Taxability of lease premium, interest income etc. in the hands of assessee - Ownership of land - irrevocable transfer of lands from the state government to the assessee corporation - assessee cannot be held as owner of the land - income is not taxable in its hand.
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Exemption of interest income u/s. 10(15)(iv) - Interest earned on bonds issued by IIFCL - principle of consistency is applicable in the instant case - benefit of exemption allowed.
Customs
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Import of restricted item - Chickpeas - there are large number of suicides by farmers, they still belongs to lower strata of society. - the restriction so imposed can never said to be in violation of Article 19(6) of the Constitution of India.
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Extended period of limitation - If the appellants were aware that the goods imported by them were other alloy steels, definitely by declaring them an classifying them as non alloy steels to avail the benefit of exemption is nothing but a misdeclaration.
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Refund of SAD - Board circular has clarified that field formations need not insist on the production of audited balance sheet and Profit & Loss Account and the certificate of the CA is sufficient to grant the refund claim.
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Refund - when the iron ore was exported on payment of duty on FOB value, the refund of excess customs duty paid does not attract bar of unjust enrichment - refund allowed.
DGFT
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Extension of the validity period of EPCG Authorisation-reg.
Indian Laws
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Compromise of dispute - Dishonor of Cheque -Since, the petitioner has paid the entire amount as agreed to between the parties, therefore, quashing of the complaint initiated at the instance of complainant/respondent would be a step towards securing the ends of justice and to prevent abuse of process of the Court
Service Tax
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Classification of service - to the extent of strategising merger and acquisition, which is resorted to enhance operating efficiencies and to capture synergies in one or more functional areas as marketing, manufacturing R & D or Finance - These services are beyond the scope of business support services.
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Classification of service - Export of services or not? - when the person on whose instruction the services in questions have been provided and is located abroad, the destination of services in question has to be treated as abroad.
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Demand of Interest - the said credit so availed by the appellant remained only a paper entry and was not utilized by them, inasmuch as there was no scope of utilization, the appellant being an export unit and the credit so availed was refundable to them in cash - the reversal of the wrongfully availed credit without utilization will not attract any interest liability.
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Activity of desilting the tailing dam of NMDC and transporting the silt to their dump - Since these services are rendered with respect to the dam in question which is a water body, they get excluded and no service tax is payable on these services.
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Nature of activity - sale or service - sale of photo books to photographers/photo studios - As the activity of printing has been exempted from payment of service tax, then also the activity undertaken by the appellant is not taxable service
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Levy of service tax - therapeutic massage / Ayurvedic massages - revenue sharing basis agreement - when it has not been alleged that the masseurs are not trained professionals, surely the benefit of doubt has to be given to the assessee - benefit of exemption allowed.
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During the impugned period, the issue whether Renting of Immovable Property is subject to levy of service tax, was under litigation - the matter is still pending before SC - being an interpretational issue, the levy of penalty u/s 78 cannot sustain
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Consulting Engineering Service - appellant is a unit of SAIL, engaged in in-house design and engineering activities for all the units of SAIL - service provided to oneself is not taxable
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The department has already been aware about the issue and therefore there is no ground for invoking the extended time proviso u/s 73 of Finance Act, 1994 and therefore the demand beyond the period of normal period is barred by limitation.
Central Excise
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Valuation - inclusion of prices of moulds - the moulds did not belonged to the buyer of the material. - In absence of this evidence, the value of moulds cannot be separately included in the assessable value of the goods
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Method of Valuation - stock transfer from one unit to another - revenue neutrality - The demand for differential duty, arrived at by questionable means, does not merit to be sustained - demand with penalty do not sustain
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Principles of Natural justice - appeal by Revenue - The manner in which this appeal has been filed appears to be very mechanical without application of mind to the case - appeal dismissed
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Restoration of appeal - failure to comply with the requirement of pre-deposit prescribed in section 35F - There is no justification for restoration of the appeal that had been dismissed for non-compliance.
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CENVAT Credit - capital goods - Pallet Racking System - the racks involved were used for storing raw materials and finished goods in the store room and that Pallet Storage Racks were essential items for safekeeping of the raw materials or the finished products - Credit allowed.
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Refund claim - non-mentioning of the commission made in the shipping bill is a technical error and since such amount has been paid by the assessee, the refund benefit cannot be denied.
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Reversal of Credit - Since on receipt of the goods in the factory, the appellant had availed Cenvat Credit of the duty amount indicated in the original invoices issued to the godown, the appellant was required to pay/reverse the equal amount of Cenvat Credit so availed, at the time of removal of the same goods
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Valuation - related party transaction - GEL has been clearing the goods to the related buyers, GISCO at price comparable to the clearance to independent customers - there is no justification for adopting the value in terms of Rule 8 & 9 of the Central Excise Valuation Rules, 2000.
VAT
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Surety Bond - VAT registration - If only one surety withdraws, then the bond remains with a single surety, though the Rule mandates it should contain two sureties - In this case, the first bond has become unenforceable.
Case Laws:
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GST
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2018 (11) TMI 801
Extension of period for filing GST TRAN-1 form - unable to upload the form within prescribed time - input tax credit - Held that:- Notification No. 48, dated September 10, 2018 has been issued for amending the Central Goods and Services Tax Rules, 2017 giving power to the Commissioner for extension of time for submission of declaration form GST TRAN-1 upto March 31, 2019. The power can be exercised by the Commissioner on the recommendation of the Council - petition disposed off.
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2018 (11) TMI 800
Release of goods to the petitioner without collecting any security - Held that:- The learned Division Bench of this Court in Renji Lal Damodaran Vs. State Tax Officer Judgment [2018 (8) TMI 1145 - KERALA HIGH COURT] has dealt with an identical issue - the respondent authorities are directed to release the petitioner's goods and vehicle on his "furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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2018 (11) TMI 799
Unable to upload GST TRAN-1 form - input tax credit - Held that:- N/N. 48, dated September 10, 2018 has been issued for amending the Central Goods and Services Tax Rules, 2017 giving power to the Commissioner for extension of time for submission of declaration form GST TRAN-1 upto March 31, 2019. The power can be exercised by the Commissioner on the recommendation of the Council - petition disposed off.
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2018 (11) TMI 797
Issue to be considered by GSTN, a limited liability company - Held that:- List the writ petition two weeks hence, as prayed for.
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Income Tax
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2018 (11) TMI 796
Technical fee/ royalty payable in five equal installments on yearly basis - to be treated as revenue expenditure or capital expenditure - Held that:- It appears that by our Judgment [2017 (6) TMI 524 - SUPREME COURT OF INDIA] lump sum payment as well as continuing royalty both are treated as capital expenditure for the assessment years in question. Since these are capital expenditure, needless to mention that the applicant/appellant shall be entitled to depreciation thereon.
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2018 (11) TMI 795
Recovery proceedings against petitioners – insurance companies - Held that:- The issue regarding maintainability of the writ petitions has become academic, as the Cholamandalam MS General Insurance Company Limited has already filed tax case appeals against the orders passed by the Tribunal and those appeals are in the process of being numbered. So far as the other insurance companies are concerned, it is stated that they are in the process of filing appeals. They would further state that the period of limitation is 120 days and that the period is yet to be over. It is settled legal principle that before the expiry of appeal time, if recovery proceedings are initiated, it would virtually render the appeal as infructuous. Therefore, considering the fact that the said writ petitions were directed to be numbered subject to maintainability and that there has been an interim order in force since 30.8.2018, we are of the considered view that the petitioners should be protected against the recovery proceedings. Hence, we restrain the respective Assessing Officers of the petitioners – insurance companies not to initiate any recovery proceedings pursuant to the orders passed by the Tribunal, against which, the insurance companies have filed appeals/are in the process of filing appeals under Section 260A of the Act.
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2018 (11) TMI 794
TPA - Disallowance of payment of Corporate Management Charges [CMC] - comparable selection - Held that:- Referring to assessee’s designing services companies companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (11) TMI 793
Allowable business expenditure - expenses claimed by the assessee has no relevance with the interest income earned - disallowance of expenditure because the assessee has not earned any profit from its business activity - Held that:- As not disputed that the fixed deposits made by the assessee was used for the purposes of obtaining SBLC. This in itself proves that the SBLC was issued by the bank for the business purpose of the assessee company. Promoting business of subsidiaries/group companies in itself is business activity. Expenses have to be incurred for the purposes of business of the assessee and not for the purposes of earning profit. The lower authorities have disallowed the expenditure because the assessee has not earned any profit from its business activity. The disallowance is on false premise. As mentioned elsewhere, the expenditure has to be incurred for the purpose of business and not for the purposes of earning profit. The expenditure has been incurred in furtherance of business activity of the appellant company and deserves to be allowed. Direct the Assessing Officer to allow expenditure. Taxing of interest earned on fixed deposits - “income from other sources” OR “Profits and gains of business or profession” - Held that:- The fixed deposits were purchased by the appellant company out of share application money received from group concerns and as mentioned elsewhere, the fixed deposits were used for obtaining SBLC of 10 million Euros in furtherance of business activity of the appellant company alongwith its group companies. In my considered view, interest earned on fixed deposit has a direct nexus with the business activity of the assessee and such interest bears the requisite characteristics of business income and has nexus with the business activities of the assessee, cannot be faulted with. Interest earned on fixed deposits would form part of profits of the business of the appellant company. See case of Universal Precision Screws [2015 (10) TMI 951 - DELHI HIGH COURT]. Thus direct the Assessing Officer to tax interest income under the head “Profits and gains of business or profession”. - Assessee appeal allowed.
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2018 (11) TMI 792
Penalty u/s 271(1)(c) - capital receipts - compensation received by assessee towards damages caused to assessee’s reputation - Held that:- Only an amount of ₹ 50 Lacs was due to the assessee and as per the terms of the contract, the assessee had a right to receive only that much of amount in case of default by CCIL and nothing more. As against this, the assessee has received an amount of ₹ 145 Lacs out of which ₹ 50 Lacs has been offered to tax by the assessee. The balance amount of ₹ 95 Lacs is stated to be received for loss of reputation etc. therefore, being capital in nature, claimed to be not taxable. The factual matrix leads us to believe so in view of the fact that the contract did not envisage any additional payment over and above the amount of ₹ 150 Lacs to the assessee. The perusal of documents leads us to believe that the said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961. The compensation could not be termed as any benefit, perquisites arising to the assessee out of exercise of profession. FAA, in our opinion, fell in error to adjudicate the same on the threshold of impact of the compensation on profit making apparatus without understating the true nature of the receipts. This being so, we have no hesitation in deleting the impugned addition of ₹ 95 Lacs. We order so. AR, during the course of hearing, had canvassed that the compensation received for breach of the terms of the contract has been brought to tax by way of insertion of new sub-clause (e) to Section 28(ii) with effect from 01/04/2018 and therefore, had no applicability to the present case. In our opinion, the said submissions are irrelevant in view of the fact that the additional compensation received by the assessee did not arise from the contractual terms at all and hence, do not require any further elaboration against the same. Penalty u/s 271(1)(c) - Since, we have allowed assessee’s appeal against quantum addition, the consequential penalty do not survive. Even otherwise, upon consideration of factual matrix, we are of the opinion that there was no concealment of income or furnishing of inaccurate particulars on the part of the assessee. It was the case where the assessee made certain claim which has not been accepted by the revenue. Viewed from any angle, the impugned penalty could not survive.
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2018 (11) TMI 791
Reopening of assessment - deduction u/s 80P(2) - proceedings initiated u/s 154 - Held that:- The reassessment notice has been issued for virtually the same reasons for which rectification proceedings had earlier been initiated but dropped. AO has not disclosed any new materials for reopening assessment. Assessment cannot be reopened merely on change of opinion, as has apparently been done in this case. AO on being satisfied that there was no apparent error in computation of income, on the basis of existing records, dropped the rectification proceedings. In the absence of any new and/or fresh materials and in the absence of any reason for formation of belief that even otherwise, income had escaped assessment even though there was no apparent mistake or error, the Assessing Officer lacked jurisdiction to issue the impugned notice. See BERGER PAINTS INDIA LTD. VERSUS COMMISSIONER OF INCOME-TAX [2004 (2) TMI 4 - SUPREME COURT] - Decided in favour of assessee.
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2018 (11) TMI 790
Nature of income - non-compete fee - revenue or capital receipt - Held that:- The assessee has parted with only some of the trademarks and has agreed to not to compete with the Henkel for only f 2 years by using its name. It has also agreed to sell its products to Henkel only exclusively. Therefore substantial business revenue stands transferred to Henkel but it cannot be said that appellant has ceased to exist after the execution of the said agreement. It might be possible that the turnover of the company has fallen substantially but because of the reason that for 2 years the assessee cannot compete with the products manufactured by Henkel. Therefore the consideration received on account of transfer of trademark is not chargeable to tax under the head capital gain as, though trademark is a capital asset, but the cost of acquisition of the same is not ascertainable. Chargeability of transfer of sale of know-how on sale of product information - whether that amounts to the transfer of right to manufacture, produce or process any article or thing where the cost of acquisition would be nil - the contention of the assessee is that after the expiry of the 2 years the appellant can make use of its right to know how and the product information to manufacture or produce its own goods - Held that:- According to the assessee there is no transfer of any right to manufacture, produce or process. On careful consideration of this argument it is apparently clear that by transferring the know-how and the product information in respect of goods the appellant has not ceased its right to manufacture, produce or process the goods. Even otherwise, it is only for the 2 years that the assessee has entered into a non-compete agreement. Therefore we find ourselves in agreement with the finding of the learned CIT appeal that the said capital receipt is not liable to tax within the meaning of the provisions of section 55 (2) of the act. In view of this, the sale of knowhow and the sale of the product of ₹ 25 lakhs and ₹ 75 lakhs respectively is not chargeable to tax under the head capital gains. Disallowance on account of service charges paid to M/s TriStar Home products private limited - Held that:- The claim of the assessee is that the super stockiest was only charging service charges for the appellant on monthly basis towards the salaries as well as the 2 expenses of the person employed. Commissioner appeals allowed the claim of the assessee stating that the services of the employees of the super stockiest were availed of by it for business purposes the appellant did not have its own staff in the region of Bihar and a sum the claim was allowed in the disallowance of the expenditure was deleted. DR could not point out what is the infirmity in the order of the learned commissioner of income tax appeals. - Revenue appeal dismissed.
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2018 (11) TMI 789
Reopening of assessment - assessee has received accommodation entry from Sh. Gupta - Held that:- There is no mention of any cheque number and amount shows is ₹ 10 lacs. As per bank statement which is at page 36 of the paper book on 09.09.2004 there is a cheque entry of ₹ 1 lacs cheque number is 00884535/-. It can be seen that the Assessing Officer has proceeded on wrong assumption fact. The amount of ₹ 10 lacs is not supported by any cheque number whereas the allegation is that the assessee has received accommodation entry from Sh. Gupta through cheque. In considered opinion the basis of reopening itself is based on wrong facts therefore, the same cannot be upheld. Accordingly set aside the notice u/s 148 of the Act the reassessment based on such notice deserves to be quashed. Since the assessment itself has been quashed the other ad-hoc disallowance stand deleted. - Decided in favour of assessee.
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2018 (11) TMI 788
Addition on ad hoc basis the repairs and maintenance expenses - nature of expenditure - revenue or capital expenditure - Held that:- These expenses cannot be treated as capital in nature more-so the assessee has discharged its onus by bringing on record cogent evidences to substantiate that these expenses were in the nature of bringing the factory building to working/running condition which was otherwise hit by cyclone and no new addition of capacity/extension of building was undertaken by the assessee. It was for the revenue to have brought on record cogent evidences to substantiate that the assessee has got benefit of enduring nature by way of additions to factory building which could be classified as capital in nature but in the instant case, no incriminating material is brought on record to substantiate that there is any extension of building or addition in the capacity of the factory building by way of extension etc.. Thus, Revenue merely saying that the amount spent on repairs are on the higher side vis-a-vis the book value of the building is not sufficient to prejudice the assessee in the absence of cogent material to discredit the version of the assessee. Hence this ground is decided in favour of the assessee and against the Revenue. The depreciation allowed earlier by the authorities shall consequently be reversed for all the affected years. - Decided against revenue Allowability of commission expenses paid by the assessee - allowable business expenditure - TDS liability - Held that:- The facts itself are disputed by both the parties which need verification by authorities as to whether deduction/payment of Income-tax at source was undertaken with respect to payment of commission being hit by provisions of Section 40(a)(ia), non consideration of CBDT circular no. 7/2009 dated 22nd October 2009 withdrawing CBDT circular no. 23 dated 23.07.1969 so far as payments of commission expenses to foreign agents, we are of the considered view that in substantial interest of justice and in all fairness to both the parties, the matter need to be set aside and restored to the file of the AO for denovo determination of the issue on merits in accordance with law. We have not commented on the merits of the issue but however our above observations shall be considered by the AO while adjudicating the issue’s. The AO shall admit all evidences/contentions submitted by the assessee in its defence in de-novo proceedings - Decided in favour of assessee for statistical purposes
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2018 (11) TMI 787
Rate of commission on the business of providing accommodation entry - assessee company is an entry provider - CIT(A) have applied 0.60% (60 paise to ₹ 1 per ₹ 100) on total credit entries appearing in the bank account - Held that:- We are aware of the fact that in case of business of providing accommodation entry, there cannot be a single rate of commission and same vary from case to case and largely depends upon the quantum of entry. We deem just and proper to estimate the average commission @ 0.30% (30 paise to ₹ 1 per ₹ 100) on credit entries appearing in the bank account of the assessee. It is further noted that AO has made double addition to the extent that benefit of netting-off with respect to income already offered by the assessee in the return of income was not allowed. Accordingly, the AO is hereby directed to re-compute the income after allowing benefit of income already declared by the assessee in the return. Charging of interest u/s. 234B and initiating penalty proceedings u/s. 271(1)(c) - Held that:- Charging of interest u/s. 234B is consequential in nature, hence, the AO is directed to re-compute the interest chargeable after giving effect of this order. As far as initiation of penalty proceedings u/s. 271(1)(c) is concerned, since no penalty under the said section has yet been levied there is no cause for any grievance on the part of the assessee. Hence, this ground is dismissed as such.
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2018 (11) TMI 786
TDS u/s 194J - payment made by appellant to the seafarers - non deduction of tds - default u/s 201(1) and 201 (IA) - Rectification of mistake - non-consideration of Co-ordinate Bench decision - Held that:- Similar issue in the case of Doehle Dauntic India Pvt. Ltd.[2016 (12) TMI 1752 - ITAT MUMBAI] for A.Y. 2012-13, the Tribunal had found that services were covered u/s.194J in an exparte order wherein the above order of the Tribunal was not brought to the notice of the tribunal. Upon careful consideration, we find that this decision in the case of Doehle Dauntic India Pvt. Ltd. for A.Y. 2012-13 was rendered exparte and the above earlier decision of the Tribunal in that assessee’s own case was not referred before it. As held in M/S. HINDUSTAN COCA COLA BEVERAGE PVT. LTD VERSUS CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] the non-consideration of Co-ordinate Bench decision can render the order of tribunal liable to rectification of mistake apparent from record. Accordingly adhering to the doctorine of stare decisis, we follow the Tribunal’s decision in similar case for the A.Y.2011-12. Hence, accordingly, we remand the matter to the file of the authorities below with same directions as in the aforesaid order to examine the applicability of section 194J. Both the counsel fairly agreed with this proposition - Appeals filed by the assessee stand allowed for statistical purposes.
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2018 (11) TMI 785
Bogus purchases - G.P. estimation - Buying from grey market - Held that:- We find the facts of the present case are identical to the facts in the case of DCIT Vs. M/s. Rang Rasayan [2018 (7) TMI 1859 - ITAT PUNE]. Therefore, considering the rule of consistency, we approve the view taken by the Ld.CIT(A) adopting Gross Profit @5% of the purchases and dismiss the grounds raised by the assessee.
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2018 (11) TMI 784
Revision u/s 263 - denial of natural justice - no sufficient opportunity was granted to the assessee as it can be seen that the notice invoking provisions of section 263 was issued on 18.2.2016 and the impugned order was passed on 14.3.2016 - Held that:- After considering the totality of the facts and considering the fact that as per provisions of section 263 of the Act, order of the A.O. can be revised by the Ld. Principal CIT, but the same provision mandates that such order cannot be passed without providing opportunity to the assessee. In the present case, we are of the view that sufficient opportunity is not granted to the assessee for representing and explaining the facts of the case. We therefore, set aside the impugned order and restore the issue to the file of the Principal CIT to decide the case afresh after providing sufficient opportunity to the assessee - Appeal of the assessee allowed for statistical purposes.
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2018 (11) TMI 783
Addition for payment of supply of software - nature of Royalty as per Article 12 of the India-Israel DTAA - taxability in India - PE in India - Held that:- Referring to assessee’s own case, we hold that TTI India cannot be treated as assessee’s dependent agent PE in India, hence, the amount is not taxable at the hands of the assessee. The grounds are allowed.
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2018 (11) TMI 782
TDS u/s 195 - commission payments made to the non-resident agents - Held that:- Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the AO for order u/s 195. The assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. As held in the case of GE India Technology Centre (P.) Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non-resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent's income in India in terms of the provisions of the Income Tax Act as also the relevant tax treaty provisions. Addition on account of prior period expenses - Held that:- We find that in the case of Saurashtra Cement & Chemical Industries Ltd Vs CIT [1994 (10) TMI 30 - GUJARAT HIGH COURT] has, inter alia, observed that “Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis” but that is precisely what has been upheld in the impugned order. It is not the case of the revenue that the expenses have been claimed twice but the short ground of disallowance is that since the expenses pertain to an earlier year, these expenses cannot be allowed. That approach is impermissible in law. - direct the Assessing Officer to delete the impugned disallowance - decided in favour of assessee.
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2018 (11) TMI 781
Disallowance of Provision for Warranty Expenses - Held that:- As is evident from the refereed tables, ratio of "actual expenses" as to "provision" is in the range of 75-105% is last four years; Hence. AO's observation is erroneous and ill-founded. Assessee had made provision @ 2.5% in AY 2007-08 but thereafter, such provision has been reduced to 2,25% AY 2008-09 onwards on the basis of experience of the assessee. Thus, such estimation was based on past experience and there in not much difference in the actual expenses. Thus, in a way, approach adopted by assessee is scientific. Accordingly, AO was not correct in holding that provision was based on estimation and not backed by scientific method. Assessee's estimate is absolutely reliable as there is not much variation in the actual expenses as compared to provision for warranty and also the actual expenses are in the range of 1.79-2.37% of sales i.e. very much near to the percentage of provision. Assessee creates "Provision for warranty" and debits the same to P&L a/c. In the next year, such provision is reversed by crediting P&L a/c after deducting amount utilized and thereafter, various expenses incurred for warranty services like travelling and salary of CSD are debited. AO has completely overlooked the fact that excess provision is reversed by crediting P&L and therefore, even if other two expenses are separately debited, the same has nullifying effect in light of reversal of provision by crediting the P&L a/c. Thus, all the objections raised by AO are on account of not considering "travelling expenses" and "salary cost of CSD" as part of "actual warranty expenses". Had AO taken pains to consider details furnished by the assessee, he would not have reached the above conclusion. "Provision for warranty" created by assessee satisfies all the criteria laid in the case of Rotork Controls [2009 (5) TMI 16 - SUPREME COURT OF INDIA] as well as AS-29. Hence, the same is allowable as deduction u/s 37 of the Act. - Decided in favour of assessee. Disallowance of unutilized MODVAT/CENVAT credit - AO upon finding that assessee follows "Exclusive method" of accounting, made addition u/s 145A in respect of "unutilized CENVAT credit" on the count that it must be added to "closing stock" of raw material - Held that:- AO failed to appreciate that the assessee has been consistently following "Exclusive method" of accounting for years. If any adjustment w.r.t. CENVAT is made in the amount of "closing stock", then corresponding adjustments need to be made in the amounts of "opening balance", "purchases" and "sales" as well. Once all such adjustments are made, there would be no impact on profit and loss of the year by inclusion of excise duty or other credits to the value of closing stock. It is mandatory for an assessee to follow "Exclusive method" of accounting for valuation of inventories in light of AS-2 on "Valuation of Inventories" issued by ICAI. However, as per S.145A, an assessee is to follow "Inclusive method" of accounting. In any case, there is no impact on profitability whether an assessee follows "Exclusive method" or "Inclusive method". Accordingly, no addition is called for u/s 145A. Amount lying with the excise authorities could not have been claimed as refund by the assessee and hence, it cannot be treated as an income in the hands of the assessee - addition has been rightly deleted by CIT(A) - Decided in favour of assessee.
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2018 (11) TMI 780
Disallowance of ad-hoc basis for the expenses relating to freight, Trip Bhatta and Diesel expenses - disallowance was made by the AO of the expenses as discussed above @3.33% on the ground that similar disallowance was made in the earlier years which was subsequently confirmed by the Hon’ble ITAT - Held that:- From the details filed by the Assessee we note that there is decline in the expenses incurred on freight/ trip bhatta expenses in relation to the transport income as evident from the chart discussed above. It is beyond doubt that the direct expenses in relation to transport income in terms of the ratio are decreasing on year to year basis resulting the better GP ratio to the assessee. There is no statutory provision under the statute to make the disallowance of the expenses if these were disallowed in the earlier years. It is undisputed fact that the GP ration of the assessee has increased/ improved in comparison to the earlier years which implies that the direct expenses of the assessee have come down. Therefore if further disallowance is made for the aforesaid expenses will certainly result loss to the assessee. There is no statutory provision prescribed under the Act to make the disallowance of the expenses at the same rate at which these were disallowed in the preceding assessment years on year to year basis. As in the case before us the situation has changed i.e. the gross profit of ratio of the assessee has increased on account of declined in the cost of the direct expenses. Therefore we are reluctant to apply the same rate of disallowance made in the earlier years which was subsequently confirmed by the ld CIT(A). Considering all we are also of the view that the possibility of leakage from the expenses in the absence of documentary evidence cannot be ruled out. Thus in the interest of the justice we are of the view that the disallowances @1.11% of the aforesaid expenditure will be just and reasonable in the given facts and circumstances. Accordingly we direct the authorities below to make the disallowance @1.11% of the expense as discussed above. - Decided partly in favour of assessee
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2018 (11) TMI 779
Business loss set off against income from capital gains - proof of incurrence of loss during the course of business - assessee derived the income from house property and the income from capital gains on sale of property - Held that:- To allow the set off business loss against the current years income, the assessee has to establish that she has incurred the loss during the course of business. AO as well as the CIT(A) have given finding that the borrowals were used for investment or for personal purposes but not for any business purposes. Further, the assessee has not furnished the details of withdrawals made from the current account of the partnership firm and matching utilisation of the funds with relevant statements of bank account. The assessee neither produced the details before the AO nor before the CIT(A) regarding the application of withdrawals made from the current account/capital account with tangible evidence such as relevant bank account copies etc. Assessee did not furnish the statement of affairs or the balance sheet from the date of first overdrawal till date to demonstrate the application of funds. No reason to differ with the finding given by the AO as well as the CIT(A) that the withdrawals made from capital account or current account with M/s ABC Engineering Works were mainly used for personal purposes and the funds were not used for any business purposes. Therefore, we hold that the AO has rightly disallowed the claim made by the assessee which was upheld by the CIT(A). - Decided against Assessee.
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2018 (11) TMI 778
Ownership of land - irrevocable transfer of lands from the state government to the assessee corporation - taxability of lease premium, interest income etc. in the hands of assessee - application of section 60, 61 and 62 of the act. Held that:- the land acquired by/vested with the State Government were only placed at the disposal of the assessee corporation for the furtherance of the objects of the MIDC Act - the claim of the revenue of there being an absolute transfer of the ownership of the land to the assessee corporation can safely be ruled out - income arising therefrom viz. lease premiums, rent, interest income on funds parked as deposits with the bank etc., cannot be taxed as the income of the assessee corporation - Decided against the Revenue. Even if the ownership of the lands was to be presumed as having been transferred to the assessee corporation, the same clearly being in the nature of a revocable transfer, hence the income arising therefrom viz. lease premiums, rent, interest income on bank deposits etc. would as per Sec. 61 r.w.s 63 of the Income- tax Act, 1961 be assessable in the hands of the transferor viz. the State Government of Maharashtra and could not be brought to tax in the hands of the assessee corporation. - Decided against the Revenue. Holding the land in fiduciary capacity - Held that:- as the assessee corporation is authorised to enter into lease agreements by virtue of Sec. 14, 15 and 37 of the MIDC Act, thus the contracts made thereof being of a statutory nature would thus not fall within the sweep of Article 299 of the Constitution of India. We thus, in terms of our aforesaid observations are unable to persuade ourselves to subscribe to the aforesaid claim of the revenue authorities, which thus fails and is rejected. Merely because the lease deeds executed by the assessee corporation under a statutory right vested with it would not lead to a presumption that the same had been disposed by the assessee corporation as an owner. We thus, are of the considered view that as the reliance placed by the revenue on the aforesaid principle viz. nemo dat quod habet is devoid of any force, hence the same is rejected. We are unable to comprehend that as to how the ld. D.R had construed the said facts for arriving at a self suiting, but a baseless observation that the same proved that the assessee corporation was the owner of the land under consideration. We have deliberated at length on the issue under consideration and find ourselves to be in agreement with the contention of the ld. A.R that the reimbursement of costs cannot be subjected to tax. However, as the requisite details which would justify the veracity of the claim of the assessee that the aforesaid amount received from the users of land was in the nature of cost to cost reimbursement involving no mark up are not available before us, hence we restore the matter to the file of the A.O. The A.O is directed to verify the claim of the assessee that the aforesaid amount received from the users of land was in the nature of reimbursement of cost and did not involve any element of income. The A.O is herein directed that in case the aforesaid amount received by the assessee corporation is proved to be towards reimbursement of costs involving no element of income, then no addition on the said count shall be made in the hands of the assessee. The Ground of appeal No. 10 is allowed for statistical purposes in terms of our aforesaid observations. Depreciation claimed by the assessee corporation u/s 32 while computing its income - Held that:- Depreciation computed under Sec. 32 of the Income-tax Act, 1961 should be deducted for the purpose of arriving at the income of the assessee. We find ourselves to be in agreement with the claim of the ld. A.R and are pained to observe that despite specific directions by the Tribunal to allow depreciation to the assessee while computing its income under the provisions of the Income-tax Act, the same had not been allowed by the lower authorities. We thus, herein restore the matter to the file of the A.O with a clear direction to allow the claim of depreciation of the assessee, as per law. The incomes arising from the lands under consideration viz. lease premiums, rent, interest income on bank deposits etc., were not the income of the assessee and had rightly been shown by it as accretion in the liabilities in the ‘balance sheets’, hence we refrain from adverting to and adjudicating upon the contentions advanced by the ld. A.R before us in respect of quantification of the additions on merits on the said count. The Ground of appeal No. 11 is disposed off in terms of our aforesaid observations. Decided in favor of assessee and against the Revenue.
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2018 (11) TMI 777
Exemption of interest income u/s. 10(15)(iv) - Interest earned on bonds issued by IIFCL - Held that:- We observe that such interest income is exempted as per CBDT Notification No.9/2009 dated 07/01/2009. We also observe that the interest earned on bonds issued by IIFCL has been claimed and allowed as 10(15)(iv) of the Act in subsequent years, i.e., in AY 2012-13, AY 2013-14 and AY 2014-15. The facts and law pertaining to the said matter remain the same throughout all the years including the year under consideration. The Revenue Authorities have consistently accepted that the interest earned on bonds issued by IIFCL is exempt u/s. 10(15)(iv) of the Act in the subsequent years. The principle of consistency is applicable in the instant case and the facts and law remaining the same, a contrary view on the said matter in the year under consideration would result in injustice to the assessee. Accordingly, we direct the AO to allow exemption of interest income u/s. 10(15)(iv) of the IT Act. Disallowance made u/s.14A r.w.Rule 8D2(iii) - Held that:- We observe that AO has taken average investment without reducing there from investment not earning any exempt income. In view of the decision of ITAT Special Bench in case of Vireet Investment[2017 (6) TMI 1124 - ITAT DELHI], we direct the AO to exclude investment not earning any exempt income while computing disallowance under Rule 8D(2)(iii). TDS credit - Held that:- We direct the AO to give TDS credit of ₹ 3,46,890/- after due verification.
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2018 (11) TMI 776
Provident fund and ESIC payments - delay in payment - Held that:- Referring to scope of amendment to the proviso to section 43B made by the Finance Act, 2003 contribution to provident fund is to be allowed deduction if the said sum is actually paid by the assessee on or before the due date of filing of return as stipulated in section 139(1) of the Income-tax Act - See KWALITY MILK FOODS LIMITED. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE - II (4). [2006 (3) TMI 262 - ITAT MADRAS-A]. Since in the present case all contribution towards provident fund and ESI were made by the assessee on or before the due dates of the filing of the return of income. Thus, in view of amended provi sions of law the claim of the assessee is allow able - decided against revenue. Addition as interest income being not charged by the assessee on the loan advanced to Elixier Impex (P.) Ltd. - Held that:- Finding of the learned Commissioner of Income-tax (Appeals) shows that the alleged account of Elixir Impex Pvt. Ltd. is a trade advance account and, therefore, the assessee was not liable to charge any interest on the same. Before us, the Revenue has utterly failed to bring any corroborative material on record to rebut the above finding of the learned Commissioner of Income-tax (Appeals). We, therefore, find no flaw in the order of the learned Commissioner of Income-tax (Appeals) and accordingly confirm the same.- Decided against revenue.
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Customs
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2018 (11) TMI 773
Incremental growth done in exports - duty credit scrips - period 1st April, 2013 to 31st March, 2014 - Held that:- The issue stands concluded in favour of the petitioners by the decision of this Court in Welspun Global Brands Ltd. [2017 (6) TMI 1209 - BOMBAY HIGH COURT], where it was held that the 2013 Notification places no cap or restriction on the value of the IEIS scrip - the petitioners are entitled to the relief sought for by them in this petition - petition allowed.
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2018 (11) TMI 772
Import of restricted item - Chickpeas - Notification dated 30/08/2018 - petitioner's grievance is that the petitioner should be permitted to import Peas in respect of all contracts entered by the petitioner prior to imposition of restriction without insisting upon the condition of 100% deposit as advance payment. Held that:- The Division Bench of Bombay High Court in the case of Taj Agro Commodities Pvt. Ltd. Vs. Union of India and Others [2018 (7) TMI 928 - BOMBAY HIGH COURT] has dealt with the similar issue of restriction on import of Peas and the restriction imposed in the matter from time to time. The Division Bench of Bombay High Court by a detailed and exhaustive order has upheld the restriction imposed by Government of India. The restrictions imposed by Government of India were justified. The farmers of the country were not getting the price in respect of Peas produced by them and large quantity of exports was affecting the farmers of the country adversely. We are all aware that in our country, there are large number of suicides by farmers, they still belongs to lower strata of society. It has become very difficult for them to meet both the ends and therefore, the restriction so imposed can never said to be in violation of Article 19(6) of the Constitution of India. The respondents were justified in imposing restrictions by issuing notifications - there is no reason to interfere with the notifications issued by the Government of India from time to time - petition dismissed.
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2018 (11) TMI 771
Maintainability of petition - non-compliance with the full amount of pre-deposit - Held that:- It will be unjust, for the petitioner, to undergo, the rigmarole of paying the deficit of ₹ 5 lakhs of pre-deposit for restoration of the appeal, which is the subject matter of the Order-in-Original dated 31.12.2013. That since in an identical appeal, by an order dated 12.09.2017, the CESTAT has remanded the proceedings to the adjudicating authority keeping all issues open, we see no reason why a similar order, be not made, as far as the subject matter of OIO dated 31.12.2013 is concerned. Appeal filed by the petitioner, against such order is deemed to be restored.
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2018 (11) TMI 770
Liability of Composition fee for being entitled for extension of time to complete the export obligation - Advance Authorisation Scheme - Held that:- Since the application for extension of time having not been rejected and order has been passed granting extension of time on 19-1-2018, which was interfered only with regard to the date of extension, now the respondent Department cannot go back on what they have said in their order dated 19-1-2018 under the pretext of demanding higher composition fee - the impugned order demanding additional sum of composition fee over and above the amount already remitted by the petitioner is without jurisdiction and illegal - petition allowed.
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2018 (11) TMI 769
Duty Drawback - case of petitioner is that Duty Drawback claim provided under Foreign Trade Policy has not been extended to the petitioners in respect of procurement of Wind Electrical Generators (WEG) for generation of electricity and its consumption - principles of natural justice. Held that:- From the materials and the pleadings placed on record, what emerges and strikes the Court is that the impugned orders passed by the first and third respondents and as communicated by the fourth respondent appear to be not on the basis of sound legal consideration and appreciation of the relevant factual materials which formed the basis for claim of the petitioners for Duty Drawback - There appears to be some force in the contentions putforth on behalf of the petitioners that the geographical location of the WEGs outside the EOUs, cannot be the reason for denying the Duty Drawback benefit to the petitioners since admittedly the location of Wind Mills is always on the basis of the constant availability of wind resources in all seasons as particularly, in this case, when the petitioners are the only consumers and beneficiaries of the energy generated by the Wind Mills it cannot be gainsaid that the location of Wind Mills outside the territorial jurisdiction can be an adverse factor for denying the benefit of Duty Drawback. When an adverse decision is taken of this nature denying the right of the petitioners to claim Duty Drawback, it is incumbent upon the authority to disclose the basis of such adverse decision and why the case of the petitioners could not be accepted. In the impugned communications, the first respondent appeared to have not taken any effort to address all the issues, but appeared to have taken a decision with closed mind. The matter is remanded back to the first respondent for fresh consideration - petition allowed by way of remand.
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2018 (11) TMI 768
Demand of Excise duty - benefit of N/N. 1/95 denied - goods bought for the purpose of export - Held that:- The appellant has used 10% of the floor space for establishing the business facility called incubation centre which was used for commercial purpose and it was not solely used for the purpose of export. We also find that there are no allegations against the appellant that there was no export done by the appellant. There are no established facts that the goods which were brought in by availing benefit of Notification No.1/95-CE were not used for export - that part of the impugned order which relates to confirmation of demand, interest and penalty by denying benefit of Notification No.1/1995 is not sustainable. Appeal allowed in part.
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2018 (11) TMI 767
Refund of SAD - Rejection on the ground of time limitation - Held that:- Division Bench of this Tribunal also in the case of Gulati Sales Corporation [2017 (11) TMI 1300 - DELHI HIGH COURT] relied upon the Sony India Pvt. Ltd. [2014 (4) TMI 870 - DELHI HIGH COURT] and has held that the limitation of one year as prescribed in Section 27 of the Customs Act is not applicable - refund allowed - appeal dismissed - decided against Revenue.
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2018 (11) TMI 766
Extended period of limitation - Section 28 of CA - classification of goods - provisional release of the seized goods - N/N. 21/2002-Cus (Sl No 190C) - Held that:- It is quite evident that the issue on merits admittedly stands decided against the appellants and the matter needs to be reconsidered, on the issue of demand by invoking extended period of limitation as provided by the Section 28 of the Customs Act, 1962 - in terms of own admission by the appellant’s major portion of demand is not barred by limitation. It is quite evident that the earliest date of examination in respect of the Bill of Entries, for which appellants have claimed that the demand is beyond normal period of limitation as prescribed by Section 28, is 12.05.2008. Thus in terms of Section 28, the period of limitation which has to be within six months from the date on which the proper officer makes the order for clearance of goods would be some date after 12.05.2008 - In case appellants intended to disagree with the duty demanded, instead of paying the same they should have asked the department to issue a show cause notice on 7th November 2008, and then it was for the department to issue the show cause notice within the prescribed period of limitation which ended after the said date. Thus even if the appellants argument that extended period of limitation cannot be invoked in the present case is admitted, even then the demand cannot be held to be time barred as the all the amounts had been paid by the appellants, prior to expiry of normal period of limitation. It was responsibility of the Appellant to ensure that he was eligible for exemption benefits claimed by him. He was thus required to make a fair declaration claiming the benefit of exemption Notification - Further it is an admitted fact by the employees of appellant who are professionally qualified metallurgical engineers that just by looking at the mill test certificate they can tell whether the consignment to which said mill test certificate pertains is of alloy steel or else. The professional experience of the said persons cannot be disregarded. If the appellants were aware that the goods imported by them were other alloy steels, definitely by declaring them an classifying them as non alloy steels to avail the benefit of exemption is nothing but a misdeclaration. The appellants have misdeclared and have thereby availed the benefit of exemption which was not due to them - the ingredients required for invoking extended period of limitation as provided by the Section 28 are satisfied in the present case. - Since the ingredients for invoking extended period of limitation under section 28 and for imposition of mandatory penalty under section 114A of the Customs Act, 1962 are identical, penalty imposed on the appellants under the said section is justified. Appeal allowed in part.
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2018 (11) TMI 765
Refund of SAD - refund rejected on the ground that the amount of refund has not been shown in the receivables in the accounts of the appellant - Held that:- As per the N/N. 102/2007 and also the subsequent Circular No.18/2010 dt. 08/07/2010, it is not the requirement at all that the said claim should be shown as receivables in the books of accounts - Board circular has clarified that field formations need not insist on the production of audited balance sheet and Profit Loss Account and the certificate of the CA is sufficient to grant the refund claim. In the present case, the CA certificate was produced but the same was not considered - refund should not be denied merely on technical violations. Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 764
Refund of excess Customs Duty paid - case of Revenue is that the Chartered Accountant has not verified that the excess amount paid has been shown in the accounts of the company as amount receivables - denial also on the ground of unjust enrichment - Held that:- On identical issue, this Tribunal in the case of Dream Logistics Co. India Pvt. Ltd. & others [2017 (10) TMI 709 - CESTAT BANGALORE] has allowed the appeals of the assessees, by holding that when the iron ore was exported on payment of duty on FOB value, the refund of excess customs duty paid does not attract bar of unjust enrichment - refund allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 763
Extension of time for installation of machinery imported under EPCG Scheme - due to the financial crunch, the appellant could not complete the installation and commissioning of the goods imported for Acid Recovery Plant and Copper Recovery Plant - Held that:- The appellants are a Government of Kerala undertaking and is primarily depending upon the funds provided by the Government. The appellants are engaged in the installation of the neutralization plant which found part of the pollution control equipment to be installed on the instructions of the Hon’ble Supreme Court and the appellant’s funds were diverted towards setting up of neutrlisation plant. Since in the present appeal, the only prayer is extension of time up to 31/12/2018 for installation of machinery imported under EPCG scheme, we think it appropriate to grant the extension up to 31/12/2018 and direct the appellant to complete the installation within this period as the appellants were having genuine fund difficulty on account of which they could not complete the installation. Appeal allowed.
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2018 (11) TMI 715
Jurisdiction - power of DRI to issue SCN - Smuggling - Section 124 of the Customs Act - Held that:- No effect will be given to any finding in the impugned judgement and order that would divest the Directorate Revenue Intelligence Officer of powers to function as a Customs Officer or to investigate cases and issue and adjudicate show cause notices for contravention of the relevant law. List the appeal for hearing on 28th November, 2018.
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Corporate Laws
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2018 (11) TMI 775
Transfer Of shares - Rectification of the register of membership of the Respondent Company, recording and transferring of 100 shares in the name of the Petitioner and recording the name of the Petitioner as the shareholder in respect of the 100 shares in the Respondent Company - lifting of corporate veil - Held that:- The petitioner on receipt of the application returned back to the petitioner, issued legal notice on 09/06/2014 and again sent application with original share certificates to the respondent on 02/07/2014 which has been received by the respondent. But the respondent did not pass a Resolution nor communicated order of refusal or acceptance and thereby the petitioner filed this petition on 29/09/2014. In the above said facts and circumstances an application for transfer of shares being evidently sent to the respondent along with the transfer application of shares on 02/07/2014 and that the respondent company did not refuse nor send any intimation as provided under sub-section (4) of Section 58 of the Companies Act, 2013, filing of present petition before the erstwhile Company Law Board is found in time and in compliance of sub-section (4) of Section 58 and therefore the preliminary objection raised by the respondent company is found not sustainable. This point is answered accordingly. Admittedly 254 shares were registered in the name of the petitioner company by transferring the shares from two individuals at a time the petitioner company was doing business competing with the respondent. However, till date the respondent has not raised a contention that the petitioner tried to block any one of its resolutions or interfered its freedom to do the business for which it was constituted. In the said background the contention that group companies of the shareholders of the petitioner are doing very same business and hence it would defeat the interest of the respondent is found devoid of any merit. Upon the said reasons, it appears to me that the question of lifting of corporate veil doesn't arise in the peculiar nature and circumstances of the case in hand. The respondent failed in proving that petitioner's shareholder companies are doing competent business with the respondent company. Being found that the petitioner's shareholders are not doing business in conflict with the interest of the respondent company, the business which is doing by the petitioner's shareholders not at all falls in the sufficient cause as laid down by the Hon'ble Supreme Court in the appeal preferred by the respondent company. This point is answered accordingly. Article 44 gives no power to refuse transfer upon the reasons advanced on the side of the respondent. The sufficient cause as per sub-section 4 of section 58 of the Companies Act, 2013 read with the Hon'ble Supreme Court's findings in this case, also does not stand established on the side of the respondent. In short, the respondent neither succeeds in showing any of the provisions in the Articles so as to refuse the transfer nor succeeds in proving that the petitioner's shareholders are doing any competing business which could be regarded as a sufficient cause as laid down in the Hon'ble Supreme Court's decisions in the case in hand. There is nothing forthcoming to prove that the transfer would violate any law as laid down in the Laxmi Tea and Co. [1989 (11) TMI 226 - SUPREME COURT OF INDIA]case. In view of the above said discussion it is of the view that the application of the petitioner is liable to be allowed however by directing the parties to bear their respective cost. The petition is allowed upon the following directions - The respondent is directed to register the transfer of impugned 100 shares in the name of the petitioner company within one month of the date of the order and to make suitable entries in the register of members thereafter.
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2018 (11) TMI 774
NCLT permitted to withdrawal of the Company Petition - withdrawal application referred to settlement and amendment of Articles of Association - Held that:- The Appellant is not a member or shareholder. The Company Petition filed u/s 397 and 398 of the old Act cannot be continued at the behest of an Intervener seeking impleadment when he is not a shareholder or member of the Company. It is settled position that such application of oppression and mismanagement can be filed only by a member of the Company. If the Appellant could not file such a Petition, the Appellant cannot insist on independently maintaining the same so as to hear out his grievances against the Petitioner and Respondents claiming that they are in collusion. As argued that under Section 402 of the old Act, NCLT has wide powers to pass any Orders when Petition of oppression and mismanagement is filed. The argument is that in the present matter, there were various earlier Orders of NCLT which showed that things were not being legally conducted in the Company and the NCLT had even passed Orders to appoint Administrator. As argued by the learned counsel for the Appellant that in such situation merely because the withdrawal application was filed, NCLT should not have allowed the withdrawal. It is claimed that withdrawal under Order XXIII Rule 1 of Code of Civil Procedure, 1908 is different as there the Plaintiff has a right to withdraw the suit while the same cannot be said with regard to Rule 82 where the provisions say that an application under Clause A or Clause B of Sub-Section (1) of Section 241 shall not be withdrawn without the leave of the Tribunal. No reason as to why the NCLT should have kept the Petition pending only because the Appellant wanted it to do so. The impleadment of the Appellant had been refused and he had been permitted only to intervene when the Company Petition was taken up for hearing so that he could point out wrong, if any. That by itself did not create such a vested right that the Appellant could claim that Company Petition should not be allowed to be withdrawn. No doubt powers of NCLT in a petition complaining oppression and mismanagement are very wide to safeguard the interest of the Company. But it would still be matter of discretion to permit withdrawal of the Petition in the given set of facts. When a claim of settlement between the warring group is stated and simple withdrawal is asked, NCLT cannot be asked to continue with the petition on a roving enquiry at the instance of a non-member. Although the withdrawal application referred to settlement and amendment of Articles of Association, the withdrawal application did not seek any directions or orders on that count. The application did not seek recording of any settlement or terms of settlement. The application merely made statement as to what according to the Respondent No.22 the Petitioner has happened between him and Respondents 1 to 11 and sought withdrawal of the Company Petition. It is a simple withdrawal. There is apparently no operative order. Thus, the original Petitioner and Respondents remain as much liable to answer for their acts to the Hon ble High Court and Hon ble Supreme Court in the litigation pending at the instance of the Appellant, as they were before withdrawal. For all such reasons, we are not interfering with the Impugned Order dated 19.12.2017 passed by the learned NCLT. Consequently, the Company Appeal is dismissed. The result is that the original Company Petition having been withdrawn, Company Appeal does not survive for impleadment. Company Appeal is disposed accordingly.
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Insolvency & Bankruptcy
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2018 (11) TMI 804
Winding up of the corporate debtor - Held that:- As HC ordered National Company Law Tribunal (NCLT), Chandigarh, may continue with the proceedings but should not pass a final order thereon. Thereafter, several proceedings have taken place and ultimately adjournments have taken from time to time, thanks to which, the period of 270 days, mentioned under the Code, has now come to an end. We have been informed by the learned counsel appearing for the Resolution Professional (R.P.) that as many as six Resolution Plans were in fact considered and rejected. The Committee of Creditors has now opined under Section 30 of the Code that the matter should proceed for liquidation. In view of this fact, we feel that the impugned interim order needs to be vacated and the proceedings have to logically culminate in a winding up of the corporate debtor.
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2018 (11) TMI 803
Corporate Insolvency Resolution Process - Resolution Plan approved by the Committee of Creditors - Whether the Committee of Creditors discriminated between the eligible Resolution Applicants , while considering the Resolution Plan of Rajputana Properties Private Limited ? - Whether the Resolution Plan submitted by Rajputana Properties Private Limited is discriminatory? - Held that:- If need be and if an extraordinary situation so arises, the Committee of Creditors holds the discretion in conformity with the Regulations framed by the Board to extend the timeline over and beyond the process documents . The said fact is also evidenced in the proviso to Clause 1.3.1 of the process document which provided that even after the deadline of the submission of the Resolution Plan , any Resolution Plan could be verified by the Resolution Professional as per I B Code and be considered by the Committee of Creditors . However, it is also provided that the Committee of Creditors may it its discretion, evaluate, accept or reject such Resolution Plans . It is informed that the Committee of Creditors by majority decision has approved the plan submitted by Ultratech Cement Limited which was found to be eligible in absence of any demerit under Section 29A of the I B Code . i. The Resolution Professional had approached the Adjudicating Authority for seeking clarification in respect of the applications filed by the IDBI for being representative as a member of the Committee of Creditors . ii. The Adjudicating Authority passed order on 17th November, 2017 against which the appeal was filed by the IDBI before this Appellate Tribunal wherein by order dated 18th December, 2017, we directed the Resolution Professional to reconsider the claims of IDBI uninfluenced by the decision of the Adjudicating Authority, Principal Bench. In compliance with such order, the Resolution Professional admitted the claim of IDBI and SBI (Hong Kong) as beneficiaries of corporate guarantees issued by the Corporate Debtor and included their representatives to be part of the Committee of Creditors subject to any final determination of the claims of IDBI and SBI (Hong Kong) at any judicial forum including the National Company Law Appellate Tribunal. iii. Eventually, IDBI and the members of Committee of Creditors arrived at a settlement in consequence of which this Appellate Tribunal allowed IDBI to withdraw its appeal. The Resolution Professional thereby, became bound by the settlement and the decision of this Appellate Tribunal by which claims of IDBI and SBI Hong Kong were allowed and incorporated. In this background, in absence of any fault on the part of the Resolution Professional it was not case for the Adjudicating Authority to pass adverse observations against the Resolution Professional . iv. The approval of the Resolution Plan is in the domain of the Committee of Creditors and not that of Resolution Professional and, therefore, if the Resolution Plan provides for the mandatory contents and is in accordance with the I B Code even if in case a Resolution Plan does not provide for full satisfaction of claims of Operational Creditors , in absence of any power of the Resolution Professional to reject such Resolution Plan , the Resolution Professional cannot be blamed. The Adjudicating Authority has failed to notice the aforesaid fact and made adverse comments against the Resolution Professional by impugned order dated 2nd May, 2018 which are uncalled for. In exercise of powers conferred by Section 31 of the I B Code read with order of remand by the Hon ble Supreme Court, we have gone through the records, revised Resolution Plan submitted by Ultratech Cement Limited, gist of which noticed earlier and being satisfied that the Resolution Plan approved by the Committee of Creditors under sub-section (4) of Section 30 in its 17th meeting held on 28th May, 2018 meets the requirements as referred to in sub-section (2) of Section 30, we approve the revised Resolution Plan submitted by Ultratech Cement Limited which shall be binding on the Corporate Debtor and its employees, members, Creditors, guarantors and other stakeholders involved in the Resolution Plan .
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2018 (11) TMI 802
Corporate Insolvency Resolution Process - mala fides on the part of the action of Ld. IRP and AR. - Whether prior to constituting the CoC the IRP is obliged to verify every claim as on insolvency commencement date within 7 days from the last date of receipt of the claims in terms of Regulation 13? - first meeting of the CoC held on 27.07.2018 was bad in law in light of the averments made by the Applicants? - Held that:- AR appointed to represent the Financial Creditors in this matter is required to act diligently and independently of the office of the IRP behoving his status as an AR. AR in his reply has failed to provide satisfactory answers for the lapse on his part to circulate the agenda and obtain voting instructions. Further both the IRP and the AR cannot be seen to form a caucus amongst themselves and act in a veil of secrecy to give an impression that they are trying to exclude the interest of the creditors, primarily for whose benefit the CIRP has been initiated apart from the protection of the other stakeholders and which apprehension had forced the applicants in the present instance to approach this tribunal. The changes made to the Code as well as attendant regulations in light of the consistent refrain of the Hon’ble Supreme Court taking into consideration the plight of the home buyers in Jaypee’s Case as well as other real estate companies have confronted the IRP’s and the AR’s with a challenging task thereby creating confusion in role clarity, particularly in a case like the instant one, where there are only home buyers who constitute the financial creditors and thereby eligible to be members of CoC as there are no institutional Financial Creditors or bankers who had financed the operations of the CD in order to become part of the COC. However, this should make the role of AR as well as the IRP more onerous and they should perform their duties with utmost diligence as required to be performed by them of which they will be aware and do accordingly. Taking into consideration all of the above we prima facie find no mala fides on the part of the action of Ld. IRP and AR. Thus within a period of two weeks from the date of this order Ld. IRP to process all the claims and categorically admit or reject the claims received from the home buyers as of the date of this order including the claims of the applicants and publish the updated list. Update the list of creditors whose claims have been admitted in order to enable them to participate in the voting process in the CoC through their Authorized Representative as envisaged under the code of the relevant provisions and regulations as extracted above. Within a period of four weeks from the date of this order Ld. IRP to convene a meeting of the CoC clearly spelling out the agenda for the said meeting and circulate the notice and agenda, as well as Resolution proposed therein
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Service Tax
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2018 (11) TMI 798
Levy of service tax - fee paid for award of license for sale of liquor - Held that:- In 26th meeting of GST Council held on 10.03.2018 it has been decided that no GST/Service Tax is leviable on the fee paid for grant of license sale of liquor for human consumption - Petition disposed off.
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2018 (11) TMI 761
Application for withdrawal of appeal - monetary amount involved in the appeal - Held that:- As the amount of tax involved in the present appeal is less than ₹ 50 lakhs, the same is permitted to be withdrawn - appeal dismissed as withdrawn.
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2018 (11) TMI 760
Time limitation of filing appeal - Jurisdiction - power of Commissioner of GST and Central Excise (Appeals) to condone delay - Held that:- It is true that the Commissioner of Central Excise (Appeals), Salem, in Appeal Nos. 199 to 203 and 206/2014-ST, has allowed and set aside the orders passed by the Adjudicating Authority, by an order dated 8-10-2014 in respect of the same issue filed by other Co-operative Societies. If this is the factual position, then this Court is of the view that the petitioner should not be non-suited and the interest of the Society should not be prejudiced on a technical ground. The delay in filing the appeal petition is condoned and the second respondent is requested to take the appeal petition and decide the same on merits - petition allowed.
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2018 (11) TMI 759
Classification of service - Export of services or not? - income from commission being received due to assisting/helping foreign company located outside India i.e. Hunkeler AG in procuring orders from India and facilitating sale of imported goods to customers in India - whether the services are export of service or in the nature of Business Support service? Held that:- There is no dispute that the service recipient of the appellant is Hunkeler AG, a Switzerland Company based out of India. There is also no dispute that the charges for services so provided are received by the appellant in convertible foreign exchange - the services provided falls in the definition of export of services. This Tribunal in M/s. Paul Merchants vs. CCE, Chandigarh [2012 (12) TMI 424 - CESTAT, DELHI (LB)] has held that what constitutes export of service is to be determined strictly with respect to the provisions of Export of Service Rules, 2005. It is the person who requested for the service and is liable to make the payment for the same, who has to be treated as recipient of service and not the person affected by the performance of the service. Thus, when the person on whose instruction the services in questions have been provided and is located abroad, the destination of services in question has to be treated as abroad. Thus, the services provided by the appellant to Hunkeler AG is irrespective it was performed on the customers based in India but it is the export of service. In the given circumstances, the findings of both the adjudicating authority below to this aspect are held to be wrong and therefore are set aside. Classification of service being received by the appellant from PBAP - Held that:- The services received by the appellant are not merely customer oriented that is not merely for evaluation of customers/ tele- marketing/ customer relationship etc. but are in addition of management of the appellants organisation not only in the form of support, but also in the form of advisory. Even to the extent of strategising merger and acquisition, which is resorted to enhance operating efficiencies and to capture synergies in one or more functional areas as marketing, manufacturing R & D or Finance - These services are beyond the scope of business support services and thus can rightly be classified under management consultancy service. Time limitation - Held that:- It is an admitted fact that the appellant had been discharging its liability as far as the services being export of service and the services being management consultant service are concerned. The ST-3 returns have regularly been filed. Hence there is no case of evasion of duty thus the allegation of mis-representation or suppression of facts as is alleged is not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 758
Refund of CENVAT credit - denial on account of nexus - Management Consultant Services - Held that:- Admittedly the service provider has paid the Service Tax. Irrespective of the fact under which category the said Service Tax has been paid, the appellant has utilized his services, which are required for providing output services. As such the Service Tax paid by the service provider would be admissible as a credit to the assessee and consequently as a refund in terms of the provisions of Rule 5 of Cenvat Credit Rules read with the Notification in question - refund allowed. Refund claim - Event Management and Commercial Training - Held that:- The said issue already stands considered by the Tribunal in the appellant’s own case reported as Steria India Ltd. v. CC & C.EX., Noida [2013 (12) TMI 212 - CESTAT NEW DELHI] laying down the said services as Cenvatable input services and the appellant being entitled to the refund of the same - refund allowed. Demand of Interest - Interest portion in respect of ₹ 20.98 Lakhs withdrawn by the appellant from their claim of refund and reversed from their Cenvat credit account - Held that:- There are no proceedings from the Revenue proposing to deny the said credit. In any case the said credit so availed by the appellant remained only a paper entry and was not utilized by them, inasmuch as there was no scope of utilization, the appellant being an export unit and the credit so availed was refundable to them in cash - the reversal of the wrongfully availed credit without utilization will not attract any interest liability - demand of interest also set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 757
Construction services - liability of service tax - construction of houses for slum people - Held that:- The activity of constructing houses for slum people under the government schemes is not taxable under Construction of Complex Services/ Works Contract/ CICS as it is intended for personal use - demand set aside. Services to SEZ - Held that:- This issue is also covered by the decision of the Tribunal in the case of Reliance Port and Terminals Ltd. Vs CCE & ST [2013 (10) TMI 339 - CESTAT AHMEDABAD], where it was held that the immunity to service tax in respect of taxable services provided in relation to SEZ is a legislatively enjoined immunity - demand set aside. Construction of stadium - Held that:- Identical issue has been decided by the Tribunal in favor of the assessee in the case of B. G. Shirke Construction Technology Put Ltd. Vs CCE [2013 (11) TMI 870 - CESTAT MUMBAI] the Sports Stadium constructed for conducting Commonwealth Games, is a non-commercial construction and not liable to service tax - demand set aside. Construction of Vishwavidyalay for M. P. Laghu Udyog - Held that:- The construction of Vishwavidyalay for M. P. Laghu Udyog is also for public welfare and not for commercial purpose, hence not taxable in terms of Circular No.80/2004 dt 17.09.2004 - demand set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 756
Site Formation and Clearance, Excavation, Earthmoving and Demolition Services - construction of Tailing Dam for M/s Essar Steel - desilting of a tailing dam for M/s NMDC - Held that:- The first work involved both supply of material as well as provision of service. The services on this account are clearly not liable to Service Tax before 01.06.2007 in view of the Hon’ble Apex Court judgment in the case of Larsen & Toubro [ 2015 (8) TMI 749 - SUPREME COURT]- demand set aside. Services related to construction of Tailing Dam post 01.06.2008 - Held that:- The demands are not made under the head “Works Contract Service” but are under the head of “Site Formation and Clearance, Excavation and Earth Moving and Demolition Service” and hence they need to be set aside as well. Desilting the tailing dam of NMDC and transporting the silt to their dump which involved excavation of the material and moving it - Held that:- Excavation and earth moving work related to renovating or restoring of water bodies are specifically excluded by the definition of site formation services. Since these services are rendered with respect to the dam in question which is a water body, they get excluded and no service tax is payable on these services - the service tax under the head of site formation services cannot be levied even on this ground. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 755
Cleaning services - cleaning services with respect to the toilets constructed and maintained by them for Singareni Collieries Limited - scope of service - liability of service tax - Held that:- Cleaning services were clearly provided within the commercial premises of Singareni Collieries Limited and hence they are not excluded from the definition of cleaning services and are liable to pay service tax - However, the calculation of the amount of the service tax to be paid by the appellant is not clear as neither the Order-in-Original nor the Order-in-Appeal indicate whether the amount of service tax has been calculated on the total constructed value or on the amount paid towards cleaning of the toilets on a monthly basis. This is a fit case to be remanded back to the original authority for the sole purpose of re-calculation of the correct tax on the amounts received by appellant from Singareni Collieries Limited for cleaning activity - appeal allowed by way of remand.
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2018 (11) TMI 754
Nature of activity - sale or service - sale of photo books to photographers/photo studios and individual photographers - demand of service tax in terms of Section 65 (78) of the Finance Act, 1994 for the period till 30.6.2012 and thereafter under Section 65B (44) of the Finance Act, 1994. Held that:- There is a complete change in the identity and nature of the photographs when printed from soft form to hard bound form as a photo book - the activity undertaken by the appellant under chapter heading 4911, is very much clear that the appellant has undertaken the activity of printing photograph on plain printing paper and thereafter bind them and selling them as photo books. The said activity amount to manufacture and the appellant is paying VAT and therefore, the said activity merit manufacturing activity and classified under Chapter 4911 and the appellant has classified accordingly. Notification No. 14.04- ST dt. 109.2004 amended by Notification No.19/06-ST dt.25.4.2006 with effect from 1.5.2006, exempts specifically the activity of printing from payment of service tax - further, the service exempted in terms of Notification No.25/2012-ST dt.20.6.2012 amended by Notification No.44/2012-ST dt.7.8.2012, 49/2012-ST dt.24.12.2012 and Notification No.3/2013 dt.1.3.2013 with effect from 1.4.2013, S.No.30, the activity of printing as job worker is exempted from payment of service. As the activity of printing has also been exempted from payment of service tax, if we take note of the fact that the activity undertaken by the appellant in relation to photography service then also the activity undertaken by the appellant is not taxable service - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 753
Refund of CENVAT credit - denial on the ground that appellant did not hold a Service Tax Registration at the material point of time - Held that:- The issue decoded in the case of mPortal India Wireless Solutions P. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 752
Classification of services - business of development of residential projects - composite contracts - Revenue entertained a doubt, show caused and demanded the duty under construction of residential residential complex as against the services of works contract - period from February 2009 to June 2010 - Held that:- The issue is already decide din the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2018 (9) TMI 1149 - CESTAT CHENNAI], where it was held that The services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial construction service or construction of complex service. For the period after 1.6.2007, service tax liability under category of ‘commercial or industrial construction service‟ under Section 65(105)(zzzh) ibid, ‘Construction of Complex Service‟ under Section 65(105)(zzzq) will continue to be attracted only if the activities are in the nature of services‟ simpliciter. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 751
Levy of service tax - therapeutic massage - revenue sharing basis agreement - Held that:- If protocols have been laid down by the Medical Consultant for the Ayurvedic massages, etc., and there is no dispute that they are being followed and further, when it has not been alleged that the masseurs are not trained professionals, surely the benefit of doubt has to be given to the respondent. There is no infirmity with the view taken by the Commissioner (Appeals) that the “Department has not adduced any evidence contrary to that nor made any enquiries about the alleged massages otherwise carried out by the appellant”. The decision of the Commissioner (Appeals) setting aside the demand of service tax on such impugned Health and Fitness Services is therefore held to be sustainable. Time Limitation - Held that:- The appellant had registered themselves as “Mandap Keeper” and had been paying service tax and filing ST-3 returns since October, 2003, whereas the Show Cause Notice has been issued for the period April, 2003 to March, 2008 - appeal of Revenue dismissed. Decided against Revenue.
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2018 (11) TMI 750
Demand of interest and penalties - Construction of residential complex services - misdeclaration of taxable value in ST3 returns by not including the cost of undevided share of the land - short payment of tax - appellant has paid the entire service tax before the issuance of SCN - Held that:- The Central Government brought amendment in Section 129 and amended Rule 2A with retrospective effect and also provided that no person should be punished for an offence which would not have been punishable had this Section not come into force. There was reasonable cause for not paying the service tax during the impugned period as there was confusion with regard to legal provisions which was made clear in 2017 by way of amendment in Rule 2A. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 749
Renting of Immovable Property Service - non-payment of service tax - benefit of abatement of property tax paid for the period 2008-09 - demand alongwith interest and penalties - Held that:- These pleas are required to be verified by the adjudicating authority - matter remanded for such verification. Penalties - Held that:- During the impugned period, the issue whether Renting of Immovable Property is subject to levy of service tax, was under litigation - the matter is still pending consideration before the Hon’ble Apex Court - being an interpretational issue, the levy of penalty under Section 78 of the Act ibid., cannot sustain and requires to be set aside. The matter is remanded to the adjudicating authority to look into the issue of abatement of property tax paid by the appellant as well as to verify whether the rent dues for the period prior to 01.06.2007 have been included in the demand - appeal allowed in part and part matter on remand.
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2018 (11) TMI 748
Condonation of delay in filing appeal - Renting of immovable property service - non-payment of Service Tax - Held that:- The appellant filed appeal before Commissioner (Appeals) only on 26.11.2014. Both the appeals were filed before the Commissioner (Appeals) after the condonable period of 90 days. The Commissioner (Appeals) has dismissed the appeals observing that the appeals were filed after the condonable period provided in the law - appeal dismissed.
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2018 (11) TMI 747
Penalty - renting of immovable property service - waiver of penalty sought on the ground that during the period the issue was under confusion - Held that:- The issue whether renting of immovable property is subject to levy of service tax was under litigation during the disputed period and there were litigations filed by the tenants pending before the various High Courts. The issue is still pending before the Hon’ble Supreme Court as per the decisions cited by ld. counsel for the appellant - the penalties imposed cannot sustain and requires to be set aside. The matter is remanded to the adjudicating authority to reconsider the issues - appeal allowed in part and part matter on remand.
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2018 (11) TMI 746
Consulting Engineering Service - appellant is a unit of SAIL, engaged in in-house design and engineering activities for all the units of SAIL - service to self or not - Held that:- Tribunal in the case of M/s. Executive Engineering Vs. CCE & ST, Jaipur, [2018 (9) TMI 662 - CESTAT NEW DELHI] has held that service provided to oneself is not taxable - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 745
Business Auxiliary Service - Commission on Consignment Sale for the period 2007 to March 2012 - demand of service tax - Held that:- Since the appellants have not collected any Service Tax from the person to whom the services were provided, Cum Tax benefit should be given while calculating the Service Tax liability under this category - Further, the Cenvat Credit on input services used for providing the aforesaid output service is also allowable. Renting of Immovable Property Service - Held that:- The appellants have not collected Service Tax from the tenants and hence, Cum Duty Benefit has to be given while calculating the service tax liability under this category. Transport of Goods by Road Service under Reverse Charge - Held that:- Some of the consignments are covered vide Notification No.34/2004-ST dated 03/12/2004 which grants full exemption in the following two situations:- (i) Where the gross amount charged on all consignments transported in a goods carriage does not exceed ₹ 1500/- and (ii) Where the gross amount charged on “individual consignment” transported in a goods carriage does not exceed ₹ 750/-. After calculating the Service liability under all the above categories and complying with the observations made by the Bench in the foregoing paragraphs, the demand may be communicated to the appellant assessee. Further, the amount of ₹ 13,87,701/- as paid by the appellant assessee should be appropriated against the demand, so calculated. Penalty - Held that:- As the issues involved interpretation of statutory provisions, and the fact that the payments have been made for the undisputed amount of Service Tax and the Department being aware of it, it is not a fit case for imposition of penalties. The appeal is remanded to the Adjudicating Authority for the limited purpose of Re-computation of the Service Tax liability under the various categories - appeal allowed by way of remand.
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2018 (11) TMI 744
Classification of services - Erection, commissioning and installation Services or not - service to various petrol pumps of Hindustan Petroleum Corporation Limited (HPCL) - extended period of limitation - Held that:- The services provided by the appellant are more appropriately classifiable under commercial or industrial construction service rather than erection, commissioning and installation agency service. The work orders as reproduced indicate that work given to the appellant by M/s HPCL is inclusive of material and labour charges and therefore they are more in the nature of Work-Contract service rather than erection, commissioning or installation service. Since, the work contract service has come to be enacted with effect from 01/06/2007 and therefore the demand prior to 01/06/2007 is not sustainable on this very ground. For the period beyond 01/06/2007 the activity is purely classifiable as work contract service - For the period from 01/06/2007 to 2nd October, 2008 also services provided by the appellant are more of the nature of the work contract service and since they have already deposited the service tax under the category of commercial or industrial construction service, there is no lacuna or short payment of the service tax in this regard. Extended period of limitation - Held that:- The department has already been aware about the issue and therefore there is no ground for invoking the extended time proviso under Section 73 of Finance Act, 1994 and therefore the demand beyond the period of normal period is barred by limitation and hence not sustainable. Appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (11) TMI 743
Refund claim - time limitation - Section 11A of the Customs and Excise Act - Held that:- As the decision is already taken to withdraw the impugned show-cause notice dated 18.02.2015 issued by respondent no. 4 at this stage, no further issue deserves to be adjudicated - Petition is disposed as withdrawn.
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2018 (11) TMI 742
Valuation - substantial question of law or not - Whether provisions of Section 3A requiring determination of annual capacity of production are relevant for the purpose of the assessee who is paying excise duty under Rule 96ZO(3) based upon furnace capacity shall be the substantial question of law for adjudication? Held that:- Section 3A refers to power of the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. It empowers the State to issue a notification having regard to the nature of the process of manufacturing or production of excisable goods of any specified description having regard to such other factors as may be relevant and to safeguard the interest of the Revenue. Section 3A(2) provides for determination of the annual capacity of production, or such factors or factors relevant to the annual capacity of production by specifying so in Rules - the Act and Rules provides for two modes of payment of Excise. First as per Section 3A pro rata, and second a fixed payment as per Rule 96ZO. If the conditions specified in the Rule 96ZO(3) are fulfilled an Assessee can opt for the flat rate specified in the said Rule. In the present case, the Tribunal has not considered the relevant legal position with reference to the facts and the scheme of Rule 96ZO(3) and Section 3A(4). The Tribunal has held that legal position stands concluded and only a factual enquiry is needed - matter remanded to the Tribunal - appeal allowed by way of remand.
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2018 (11) TMI 741
Branding - imposition of duty under the Central Excise Act, 1944 treating the jute bags of the appellants as branded jute bags - Held that:- The show cause cum-demand notice in substance cannot survive as even proceeding on the basis that the allegations made therein are correct, show cause cum-demand notice to the extent the same seeks to impose the excise duty in respect of jute bags which carry the brand names of the procuring agencies and other particulars is not legal. The writ petitioners were not required to pay duty for the subject period alleged to have been evaded by them in the show cause notice in respect of jute bags which carry on them the brand of the procuring agencies and other particulars - petition allowed.
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2018 (11) TMI 740
Valuation - inclusion of prices obtained in respect of sale of moulds to buyers in the assessable value - the moulds were originally purchased by the appellant - Held that:- The entire case of the Revenue is based on the assumption that the moulds actually belonged to the buyer and it was arrangement made between the parties to avoid payment of Excise duty. No evidence in respect of such assertion has been produced. Revenue has not been able to establish that the moulds belonged to the buyer of the material. In absence of this evidence, the value of moulds cannot be separately included in the assessable value of the goods. The appellants have been able to show that the moulds were purchased by them years ago and the same were used to manufacture and clear the goods to the buyers for a considerable period of time - the allegation made by the Revenue regarding inclusion of the price recovered in the sale of moulds in the assessable value cannot be upheld. Appeal allowed.
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2018 (11) TMI 739
Penalty - it was alleged that appellants have availed CENVAT credit based on invoices issued by their head office as input service distributor without getting registered as ISD - Held that:- It is seen that they have reversed the credit much before issuance of the show cause notice. It is also submitted that the appellants had sufficient balance in their CENVAT account - penalty cannot sustain relying on the case of THE COMMISSIONER OF CENTRAL EXCISE, MADURAI VERSUS M/S. STRATEGIC ENGINEERING (P) LTD. [2014 (11) TMI 89 - MADRAS HIGH COURT] - appeal allowed in part.
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2018 (11) TMI 738
CENVAT Credit - input/capital goods - MS Items used for fabrication and supporting structures for capital goods and cement was used for laying foundation - Held that:- These items are eligible to be used as capital goods is a law settled by various decisions - the issue of eligibility to avail CENVAT credit on various M.S. items prior to 07.07.2009 is well settled in favor of the appellant in the case of Bhavya Cements Limited [2018 (10) TMI 525 - CESTAT HYDERABAD] - credit availed prior to 07.07.2009 allowed. Eligibility to avail CENVAT credit post 07.07.2009 - Held that:- Appellant availed CENVAT credit, however could not justify that this amount on M.S. items were in fact used for capital goods - demand with interest upheld. Penalty - Held that:- Since the major portion of the demands is set aside and also holding that there was litigation which was being undertaken before various judicial forums, there is no reason to visit the appellant with any penalty - penalty set aside. Appeal allowed in part.
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2018 (11) TMI 737
Process amounting to manufacture - repacking of mercury - note 10 of Chapter 28 of the Central Excise Tariff Act - Held that:- While there is a charge that the goods were repacked from bulk to smaller packing but there is no charge that there was any labeling or relabeling done. In absence of the change of labeling or relabeling simply repacking from bulk to small containers, as charged in the Show Cause Notice would not amount of manufacture - demand do not survive - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 736
Method of Valuation - related party clearances or not - appellant were clearing 80 percent of the final product through two trading firms namely M/s Chetan Plastics and M/s Sanjay Packaging owned by Smt. Manjulaben Shah and Shri Sanjay Shah. He pointed out that the said persons were also Directors in the appellant’s company - Held that:- To invoke Rule 9 of the Central Excise Valuation Rules, it has to be first established that the two entities are related to each other. It is seen that the appellant is a company whereas the trading units are proprietorships. In these circumstances the two cannot be held to be related, in terms of section 2, clause 41 of the Companies Act, 1956, the definition relates only in terms of natural persons. Since, the foundation of the charge i.e, relationship, itself is not established, the other charges automatically fail - appeal allowed.
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2018 (11) TMI 735
Input Tax credit - input services - security services - Held that:- The appellants were compelled to remove and store the hazardous waste outside the factory and to engage security for providing protection for the hazardous waste - the security services are related to manufacturing activity and therefore the denial of input tax credit is unjustified - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 734
Utilization of CENVAT Credit - whether the credit available in the cenvat book of the assessee can be utilized to discharge duly in terms of Rule 6 of the Rules issued under N/N. 43/2001 ibid? - Whether such amounts, once paid by debit in cenvat credit, can be allowed for recredit? Held that:- These issues have come up before the Tribunal in the case of Shree Rajasthan Syntex Ltd. vs. Commissioner of C.Ex, Jaipur-II [2016 (3) TMI 200 - CESTAT NEW DELHI], where it was held that Since the payment of duty on the inputs has to be discharged by appellant in the present case, in the absence of any specific bar, the appellants have utilized the cenvat credit available in the records for this purpose. There is no infirmity in such payment - also it is held that the inputs having been used for the intended purpose of manufacture and clearance of dutiable final products, the credit of such payment is again available to the appellants. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 733
Vacation of protest - duty paid under protest for clearance of warranty goods - Held that:- The Department has not disputed that the goods were cleared under warranty replacement - also the department has not disputed that the warranty cost of 2.5% of the factory cost was already included in the original value of the equipment at the time of removal of the original equipment - also, the appellant has not charged any price for the replacement of the goods during the warranty period. In the circular issued by the Department on 30.6.2000, it is also clear that the appellant is not required to pay the excise duty on the goods cleared under warranty/replacement clause. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 732
Reversal of CENVAT Credit - all the goods falling under the First Schedule to the Customs Tariff Act, 1975 were exempted from payment of whole of the Education Cess and Secondary Higher Education Cess - time limitation - Held that:- The appellants have taken the credit on the basis of valid invoices issued by the dealer and Department cannot question the taking of the credit at the receivers end even if some irregularities are there at the end of the dealer. On merit, the impugned order is not sustainable and therefore without going into the question of limitation, the demand is set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 731
Refund of duty paid under protest - remission of duty - scope of SCN - CBEC Circular No. 800/33/2004-CX dated 01.10.2004 - Held that:- It is settled legal principle that no authority is allowed to travel beyond the show cause notice - In the present matter, the show cause notice proposes the disallowance of refund mainly on the ground of clarification issued by CBEC Circular dated 01.10.2004, and the Adjudicating Authority also rejected the claim on the said ground. But in the impugned order there is not even a whisper by the Commissioner (Appeals) about the said Circular. A new case cannot be made out at the Appellate level and the department cannot travel beyond the show cause notice. The matter is remitted to the Commissioner (Appeals), Raigad for passing a fresh order after taking into consideration all the contentions raised by the Appellant - appeal allowed by way of remand.
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2018 (11) TMI 730
Process amounting to manufacture- activity of galvanization - job-work - N/N. 214/86-CE - demand of duty. Activity of galvanization - bonafide belief that activity of galvanization does not amount to manufacture - time limitation - Held that:- Ignorance of law is not an excuse. Therefore, non payment duty on the galvanization activity, which amounts to manufacture, the appellant is liable to pay duty - As the appellant has concealed the vital fact from the department, therefore, malafide of the appellant is proved - appellant liable to pay duty - extended period rightly invoked. Post April, 2007, the activity of galvanization undertaken by the job worker - liability of job worker is to pay duty - Held that:- As the appellant has filed undertaking to pay duty on the activity of galvanization done by the job worker, therefore, the appellant is liable to pay duty for the period May, 2007 to January, 2010 - demand confirmed. Appeal dismissed - decided against appellant.
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2018 (11) TMI 729
Method of Valuation - stock transfer from one unit to another - revenue neutrality - Held that:- Since such transfer does not involve sale, the valuation is required to be adopted in terms of Rule 8 of the Central Excise Valuation Rules, 2000. This Rule prescribes that the valuation is to be determined at the rate of 115%/110% (as prevalent at the relevant time) of the value of the goods arrived at as per CAS-4 Standard. Such Standard have been prescribed by the Institute of Cost & Works Accountants of India (ICWAI). The valuation adopted for such stock transfer by the appellants is admittedly is not meeting such Standards - Neither the value adopted by the appellants for payment of duty nor the value finally adopted by the Revenue, is as per CAS-4 Certificate. The valuation adopted by the Department has not been certified by the Cost Accountants. Revenue Neutrality - Held that:- It is not in dispute that any differential duty paid by Durgapur Unit will be available as cenvat credit in the Burdwan Unit. This leads to revenue neutral situation. The demand for differential duty, arrived at by questionable means, does not merit to be sustained - demand with penalty do not sustain - appeal allowed in part.
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2018 (11) TMI 728
Principles of Natural justice - case of Revenue is that the learned Commissioner has erred in assessing the circumstances of the case and dropped the proceeding without assigning proper legal reasoning - Held that:- We are at loss to understand which circumstances have been erroneously assessed by the Commissioner while dropping the demand. The review committee having two Chief Commissioner could have done a better job if they could have at least pointed out a single circumstance which has been wrongly assessed by the Commissioner in his order dropping the demand. The manner in which this appeal has been filed appears to be very mechanical without application of mind to the case - appeal dismissed - decided against Revenue.
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2018 (11) TMI 727
CENVAT Credit - capital goods - Cement as well as various Steel structurals which were used for the purpose of fabricating foundation structures for installation of capital goods in their factory - Held that:- In the Larger Bench decision of Tribunal in the case of Mangalam Cement Ltd. Vs. CCE [2018 (3) TMI 1547 - CESTAT NEW DELHI], the benefit of Cenvat Credit stands allowed to assessee in similar circumstances - credit allowed - appeal allowed - decided in favor of assessee.
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2018 (11) TMI 726
SSI Exemption - scope of rural area - Revenue has pleaded that as the assessee was situated in Bhugaon Village, which is notified under Urban Land Ceiling Act, the said area cannot be considered to be rural area and as such benefit of exemption notification has been wrongly extended - Held that:- The Commissioner has given a detailed findings by referring to the definition of rural area and has observed that the assessee was paying property tax to the local Gram Panchayat under Section 129 (1) of the Bombay Village Panchayat Act and as such has to be considered as a unit located in rural area - Revenue has not advanced any evidence so as to establish that the said village did not fall under the rural area so as to rebut the findings of Commissioner - appeal dismissed - decided against Revenue.
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2018 (11) TMI 725
Penalty u/s 11AC - SSI exemption - appellant did not pay any Central Excise duty on removal of the final products out of its factory premises - Held that:- Due to inadvertence, the duty amount was not discharged by the appellant at the time of removal of goods from the factory. However, the appellant had issued commercial invoices, showing the VAT element for sale of final products - the department had not adduced any substantial evidence to hold that non-payment of duty by the appellant at the material time was attributable to the reason of fraud, collusion, etc., with intent to evade payment of duty. Hence, in the absence of proper substance of clandestine manufacture and removal, the charges of suppression cannot be leveled against the appellant for imposition of penalty under Section 11AC of the Act - penalty set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 724
Restoration of appeal - failure to comply with the requirement of pre-deposit prescribed in section 35F of Central Excise Act, 1944 - Held that:- In the present instance, the applicant has deigned to initiate efforts to comply only upon exhausting the recourse to Hon'ble High Court of Bombay which they found to be shut against them. It is a settled convention that a litigant cannot subject judicial mechanism to a test of chance and subject themselves to rule of law when the toss is against them. Even if they had been constrained by circumstances from meeting the pre-deposit requirement ordered by the Tribunal in full, partial compliance with application for modification before the Tribunal, or before the Hon'ble High Court, would have been a proper demonstration of bonafides. In Kirtikumar Jawarharlal Shah v. Union of India [2014 (9) TMI 244 - SUPREME COURT OF INDIA] the failure to diligently prosecute the appeal, evident from the casual manner of filing the application, was held to invalidate the right to appeal. That, too, is apparent in the present application which was not only filed after the period prescribed in law but also failed the test of diligence in seeking condonation when they did so. There is no justification for restoration of the appeal that had been dismissed for non-compliance - Application for restoration of appeal is dismissed.
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2018 (11) TMI 723
CENVAT Credit - capital goods - Pallet Racking System - Held that:- In the case of M/s. Ashok Leyland John Deere Construction Equipment Co. Pvt. Ltd. [2018 (2) TMI 458 - CESTAT CHENNAI], the Revenue had denied the credit on the storage racks holding that they are neither capital goods nor inputs and after considering various decisions, this Bench had allowed the appeals with consequential reliefs - The Revenue has not been able to furnish any contrary decision nor was it able to deny the fact that the racks involved were used for storing raw materials and finished goods in the store room and that Pallet Storage Racks were essential items for safekeeping of the raw materials or the finished products. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 722
Valuation - SKO and LPG when cleared by the appellant to other OMCs for distribution in PDS - Department was of the view that the duty is required to be paid on the consideration received by the appellant from other OMCs at ZTVL - Penalty - Held that:- The concept of transaction value was introduced with the amendment to Section 4 of the Act w.e.f.01.07.2000, the new Central Excise Valuation Rules, 2000, were also notified at the relevant time. The explanation to the relevant changes were circulated vide Circular F.No.354/81/2000-TRU dated 30.06.2000. Penalty - Held that:- The issue of valuation of petroleum product was in a state of flux immediately after the introduction of changes in Section 4 of Central Excise Act, 1944 - the imposition of penalty on the appellant in this case is not justified and is set aside. Appeal allowed in part.
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2018 (11) TMI 721
Refund claim - rejection on the ground that the refund applications were filed beyond the prescribe time limit - N/N. 41/2007-ST dated 16/10/2007 - Held that:- Considering the scope of notification dated 16/10/2007, this Tribunal in the case of Chandrashekhar Exports [2015 (11) TMI 1112 - CESTAT MUMBAI] has held that even if the refund claim was filed beyond the stipulated period, the benefit cannot be denied, once it is substantiated that the mandatory requirements of the notification have been duly complied with. Non-compliance of the condition regarding reflection of commission amount in the shipping bill - Held that:- Hon’ble Gujarat High Court in the case of AGB Shipyard Ltd. [2013 (9) TMI 741 - GUJARAT HIGH COURT] has held that non-mentioning of the commission made in the shipping bill is a technical error and since such amount has been paid by the assessee, the refund benefit cannot be denied. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 720
Reversal of Cenvat Credit - Removal of crushing and screening machinery and plants - the Central Excise officers observed that the amount of Central Excise duty paid on removal of goods to the buyer was less than the amount recredited in the Cenvat register at the time of receipt of the goods from the godown - Rule 16 (2) of the Central Excise Rules, 2002 - Penalty - Held that:- Rule 16 of the Central Excise Rules, 2002 deals with the situation of taking of credit of duty on the goods brought to the factory. Subrule (2) of the said rules provides that if the process does not amount to manufacture in respect of the receipted goods in the factory, then on removal of the same goods again from the factory, equal amount of credit taken should be reversed. Since on receipt of the goods in the factory, the appellant had availed Cenvat Credit of the duty amount indicated in the original invoices issued to the godown, the appellant was required to pay/reverse the equal amount of Cenvat Credit so availed, at the time of removal of the same goods from the factory to the buyer’s premises - Decided against appellant. Penalty u/r 25 of the CER 2002 read with Section 11 AC of the CEA 1944 - Held that:- Considering the fact that during the relevant period, the appellant had paid excess duty of about 15 lakhs in respect of clearances of the goods, it cannot be said that short payment of duty in respect of the disputed consignment was attributable to the reason of fraud, collusion, suppression of facts etc., with intent to defraud Government revenue - provisions of Rule 25 of the Central Excise Rules, 2002 read with Section 11 AC of the Central Excise Act, 1944 cannot be invoked - penalty set aside. Appeal allowed in part.
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2018 (11) TMI 719
Valuation - related party transaction - Revenue took a view that the valuation of the goods for clearance from GEL to GISCO, cannot be the transaction value - applicability of Rule 8 & 9 of the Central Excise Valuation Rules, 2000 - Held that:- The present issue has been settled by the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. [2007 (2) TMI 5 - CESTAT, MUMBAI]. The Larger Bench considered the question of valuation of the goods are sold to related parties when part of the goods were also cleared to independent buyers and held that the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers. In the present case, GEL has been clearing the goods to the related buyers, GISCO at price comparable to the clearance to independent customers - there is no justification for adopting the value in terms of Rule 8 & 9 of the Central Excise Valuation Rules, 2000. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (11) TMI 718
Detention of Consignments - inter-state sale - sales tax already paid - scope of KVAT Act - Jurisdiction - Held that:- It is not a question of the second respondent's inherently lacking the jurisdiction-the subject matter jurisdiction - The authority may have decided erroneously, if at all. Then the petitioner's remedy lies under Section 57 of the Act. Petition disposed off holding that the petitioner is free to invoke Section 57, or any other statutory provision, to seek redressal against the Ext.P9 to P20 orders.
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2018 (11) TMI 717
Recovery of arrears of tax - attachment of ancestral property - Department floated an amnesty scheme for the defaulting dealers - Held that:- Both the petitioners have every right to protect their interest vis-ŕ-vis the property. And for that, they wanted to take advantage of the scheme - the petitioners have eminently answered the description of “the persons aggrieved.” - petition allowed - decided in favor of petitioner.
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2018 (11) TMI 716
Surety Bond - VAT registration - Effect of Withdrawal of sureties - discharge from liability of being surety - Rule 19(4) of the Kerala Value Added Tax Rules, 2005 - Held that:- Rule 19(2)(d) mandates that the bond should be in Form No.6 and that two sureties should sign it. If only one surety withdraws, then the bond remains with a single surety, though the Rule mandates it should contain two sureties. As seen from sub-rule (4), it does not provide for substitution of sureties. It only provides for the substitution of the bond, as one of many alternatives - In this case, the first bond has become unenforceable. If the Department's plea is to be accepted-that is, the second bond is to meet the additional demand on the dealer-then sub-rule (4) of Rule 19 remains unanswered. Even otherwise, Section 133 of the Contract Act may also come in the way of the Department’s defence. Without the surety’s consent, if the principal debtor and the creditor vary the contractual terms, then, that variation discharges the surety from the transaction and the liability. Viewed from either perspective, the Department's contention cannot be accepted. It must fail - petition allowed.
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Indian Laws
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2018 (11) TMI 762
Compromise of dispute - Dishonor of Cheque - Section 138 of Negotiable Instruments Act - whether a compromise, at this stage, can be permitted to be effected to between the parties where the petitioner has been charged under Section 138 of the Act? - Held that:- This court is not powerless in such situation and adequate powers have been conferred upon it not only under sections 397 read with Section 401 or Section 482 Cr.P.C. (hereinafter referred to as the Code) but also under Section 147 of the Act for accepting the settlement entered into between the parties and to quash the proceedings arising out of the proceedings, which have consequently culminated into a settlement. This power has been conferred to subserve the ends of justice or/and to prevent abuse of the process of any Court. Though, such power is required to be exercised with circumspection and in cases which do not involve heinous and serious offence of mental depravity or offences like murder, rape, dacoity etc. This Court after being satisfied that the cheque amount with the assessed cost and interest has been paid, can close the proceedings even in absence of the complainant. Since, the petitioner has paid the entire amount as agreed to between the parties, therefore, quashing of the complaint initiated at the instance of complainant/respondent would be a step towards securing the ends of justice and to prevent abuse of process of the Court, especially, when the petitioner is facing pangs and suffered agony of protracted trial and thereafter appeal/revision for the last about one year and has deposited the amount as was agreed to between the parties - the impugned substantive sentence of simple imprisonment imposed in this case shall stand modified - petition disposed off.
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