Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 20, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
TMI Short Notes
Notifications
Highlights / Catch Notes
GST
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Levy of GST on providing back office support services, payroll processing, to main records of employees to overseas clients and after finalization of purchase / sale between the client and its customers. - Applicant is liable to GST.
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Levy of IGST - Zero-rated supply - the said services of testing of the protypes, which are physically made available by the service receiver to the service provider, are provided in India and therefore liable to tax.
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Levy of IGST u/s 5 (3) of IGST act, 2017 - supply of lottery tickets by the organising state - applicant is liable to payment of IGST under Reverse Charge mechanism
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Levy of GST - Sale and/or Purchase of DFIA licenses - DFIA is distinguishable from ‘Duty Credit Scrips’ and cannot be considered as a Duty Credit Scrip - GST is applicable on Sale and / or Purchase of DFIA licenses
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Levy of GST - collected penal interest for default in repayment of EMI - The activity of collecting penal interest by the Applicant would amount to a taxable supply under the GST regime
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Levy of GST - education and training programmes conducted through its 13 co-operative training centres and 33 district co-operative boards - The applicant's activity is covered within the scope of supply of services and there is no exemption in respect of their supply.
Income Tax
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Addition u/s 14A - one needs to read the words "expenditure incurred" in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditure incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax.
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Applicability of section 50C - Capital gain - Sale of right in land/contingent right - proof of transfer of capital asset - Section 50C is also applicable on lease hold property or khatedari land.
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Eligibility for deduction u/ 80G - treatment of donation as bogus - Just because the trust was engaged in some unauthorized activity does not mean that the assessee is not entitled to claim the benefit u/s 80G of the Act.
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Charitable activity - CIT while dealing with the application for grant of registration of limiting its jurisdiction within the aspect of its objects unnecessarily exceeded to the issue of income derived by the Trust spend for charitable purposes and the profit earned by the Trust
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TDS u/s 194C - payment for development of residential complex for the employees - When the assessee is only a purchaser, if any advance sale consideration is paid, the assessee has no business to deduct the tax at source as it is for the seller of the sites to pay the capital gains depending upon the tax payable by him
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MAT - adjustment - adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB
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TPA - ALP determination - Without complying to the statutory provisions, the Transfer Pricing Officer certainly cannot determine the arm's length price on ad-hoc / estimation basis.
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Claim of exemption u/s 54 - LTCG - As the assessee had appropriated the amount of the LTCG towards purchase of the new residential property before the date contemplated under Sec.139(4), benefit of exemption cannot be denied.
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Computation of capital gain - Addition on account of conversion of cumulative and compulsory convertible preference shares (CCPS) into equity shares treating the same as transfer u/s 2(47) - Such conversion cannot be treated as transfer - no additions.
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Estimation of income - when the variation in the GP is insignificant and there is an increase in the turnover of the assessee of more than three times then there is no justification of making addition by applying the GP rate of earlier year.
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Bogus Long Term Capital Gains on purchase and sale of the shares - claim of exemption made u/s 10(38) rejected - When there is no surviving adverse order of SEBI, against the claim of the assessee, no addition can be made.
Customs
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There is no justification for the extreme steps taken by the lower authority in ordering for forfeiture of the security deposit and revoking the customs broker license.
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The pontoons which by definition are not navigable on their own but need to be towed fitted with lifting and handling machines such as present one are classifiable under chapter heading 8905.9090
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Export of Iron Ore - demand of export duty - whether the test report of the CRCL is on wet basis or dry basis. The benefit of both these doubts will go in favour of the revenue for the simple reason that the exemption notification has to be strictly construed
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Penalty u/s 114 (i) and 114 (iii) of the Customs Act, 1962 - exports of overvalued and sub standards goods - Only on the basis of familiarity between the two, it cannot lead to inference of Appellant having committed any illegal act.
IBC
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Corporate insolvency process - Each workman’s due is more than rupees one lakh and the ‘Corporate Debtor’ having defaulted to pay the amount, the application was fit to be admitted.
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Misconduct by insolvency professional - By his conduct and action, Mr. Golla has caused irreparable damage to the reputation of the institution of insolvency profession and rendered himself a person not fit and proper to continue as an IP.
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Corporate insolvency process - misconduct by Resolution Professional(RP) - By not allowing and facilitating the CoC to play its rightful role, Mr. Gupta has dealt a fatal blow to the basic premise of the Code. He also failed to protect the interests of the corporate debtor and creditors and stepped into the shoes of the CoC.
Service Tax
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CENVAT Credit - common input services for trading goods - Rule 6(5) starts of non-obstante clause ‘notwithstanding’, which would indicate that the provisions of Rule 6(3) are not applicable for the provisions of Rule 6(5) of Cenvat Credit Rules, 2004.
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SEZ unit - refund claim - appellants were careless in not producing the documents related to export - Original Authority directed to examine the additional documents provided by the appellant
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SSI Exemption upto ₹ 10 lakhs - use of brand name of others - earning commission for promotion by way of marketing and selling of branded goods under the brand name/trade name viz., BATA on behalf of their principals M/s Bata India Ltd. - Benefit of exemption allowed.
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Activity of loading of coal from Railway siding into Railway wagons making use of Pay Loader - Any activity incidental to freight of cargo is liable to be taxed under “cargo handling service”
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Refund claim - The Place of Provision of Service is J&K which, as discussed, is outside the taxable territory in accordance of Section 66B. The Department herein was not liable to charge the service tax qua the said provision of service.
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Doubtlessy, numerosity adaptation effect should not influence judicial decisions but it would do well for the applicant Commissioner not to be oblivious of the congruity of cognition on 'duty free' supplies and to forbear from projecting any dissonance with the decision of the Tribunal as lapsus calami.
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Import of services or not - reverse charge - place of provision of services - Simply because the appellant company is located within India and the transactions which they made globally will also figure in their books of accounts, it would not mean that the services have been received in India.
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Demand of Service tax on straightening and cutting of TMT bars - the services rendered by the appellant by processing the goods manufactured by RINL are exigible to service tax.
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Export of services - performance based service - palace of supply of services - Scientific and Technical Consultancy Service - the aforesaid services rendered by the appellant are in the nature of export of service and hence eligible to cash refund of accumulated CENVAT Credit.
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Principles of natural justice - the appellant’s stand that it had no knowledge about such issue of show-cause notice and passing of Order-in-Original is not without any basis.
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Pandal or Shamiana services - the said ceremony called “Gur-ta-Gaddi Tercentenary Celebration” was an event of great religious significance - during the period the service was exempt from service tax.
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CENVAT Credit of service tax paid - outstanding dues - restriction under Rule 4(7) - since the respondent had paid the entire Service Tax on which they were liable for taking the credit i.e. on the amount as mentioned in the Bill/invoice, they were entitled to avail credit.
Central Excise
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Classification of goods - Non Vegetarian Burgers, McCurry pans, Non Vegetarian wraps etc. - The basic purpose of the phrase “put up in unit containers” is that for whole sale clearance from the manufactory the goods have been packed in unit container.
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Clandestine removal - CTD Bars - from the adjudication order and the reply to show cause notice also it is evident that the appellants have never retracted their statements either in part or toto - demand confirmed.
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Valuation - physician samples - There was a reasonable cause for the appellant to mistakenly value the goods on cost construction basis instead on the basis of comparable price under Rule 4 - the extended period of limitation cannot be invoked.
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Valuation - captive consumption - the factual matrix is that appellant has not consumed the goods for production or manufacture of other articles but has consumed the same for Civil construction from the expansion of the projects, hence the claim of applicability of the Rule 8 is ruled out.
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SSI Exemption - LIC Logo printed on diaries do not establish any connection between the goods and the logo, hence the same cannot be said to be in the course of trade. Further it cannot be said that LIC is in trade of selling the LIC diaries. - Benefit of exemption allowed.
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Refund of Excise duty paid during investigation - If an amount of ₹ 25 lakhs stands appropriated on 30.10.2009, the case made out by the revenue that appellant had not debited amount in PLA and hence not eligible for refund is totally incorrect proposition.
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CENVAT Credit - capital goods - appellant availed 100% credit in first year - Revenue has grossly erred in invoking extended period of limitation even after being satisfied that it was the case of revenue neutrality.
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Imposition of penalty - its availment of allegedly inadmissible credit was previously subjected to scrutiny by the audit parties at least on three occasions as reveals from the audit report - it cannot be said that any suppression of fact has been established against the appellant.
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Recovery of erroneous refund - it was alleged that appellants had not the manufactured the goods and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - the allegation is only on the basis of the assumption and presumption.
Case Laws:
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GST
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2018 (11) TMI 889
Deduction of GST and service tax from salary - Exploitation of the workmen by the State Government as well as local bodies - upgradation of honorarium/salary component from time to time as per the labour index - Held that:- The State must act like a Modal employer. Something which cannot be done directly cannot be permitted to be done indirectly. The agreement entered into between the UPNL and its employees is unconstitutional. Thus, violative of Articles 14 and 16 of the Constitution of India. The employees working through agency of UPNL, deployed by the State Government and local bodies are entitled to at least minimum of pay-scale, which is being paid to their counterparts on the principle of “Equal Pay for Equal Work.” The employees sponsored through UPNL are working without being regularized for decades together. It amounts to begaar. In the instant case also, the arrangement made by the State Government through UPNL is a sham. The Principal Employer is State Government - The action of the State Government of not regularizing the employees sponsored through agency of UPNL and to deny them minimum of pay-scale including dearness allowance is arbitrary and unreasonable. The State Government is directed to regularize the employees sponsored through UPNL in a phased manner within a period of one year as per regularization schemes framed from time to time - The State Government is directed to ensure that the employees sponsored by UPNL get minimum of payscale with dearness allowance along with arrears to be paid within a period of six months from today - The respondents are directed not to deduct any GST or Service Tax from the salary of the employees sponsored by UPNL - petition disposed off.
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2018 (11) TMI 888
Detention of goods - goods detained for the reason that the petitioner has tried to hide the correct identity of the consignee - Held that:- In view of the bilty and invoices, prima-facie there cannot be any controversy with regard to the identity of the person or dealer to whom the goods meant for delivery. The detained goods and the vehicle shall be released forthwith, on the petitioner furnishing security other than cash and bank guarantee and the indemnity bond of the amount of the proposed tax and the penalty, as the petitioner is the owner of the goods, as per notice under Section 129(3) read with Section 129(1)(A) of U.P.G.S.T. Act.
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2018 (11) TMI 887
Levy of IGST - Zero-rated supply - testing services provided to its overseas group entities - place of supply - export of services or not - Held that:- In the subject case it is seen that the supplier of service is in India and the receiver of the service is outside India and therefore as per Section 7(5) of the IGST Act we find that the supply of service in this case shall be treated as a supply of service in the course of Inter-State trade. Applicability of provisions of Section 2(6) of the IGST Act - export of service - zero rated supply - Held that:- There is no doubt that the, supply of service in the present case satisfies clauses (i), (ii), (iv) and (v) of Section 2(6) of the IGST Act. However to qualify as an export all the conditions must be satisfied and therefore we now take upon ourselves to discuss whether the applicant also satisfies clause (iii) i.e. whether the place of supply in the subject case is outside India. We agree with the applicant that the “place of supply” is relevant to decide the taxability and the Status of taxability of the testing services provided by them to their overseas clients and would therefore require detailed examination. Section 13 of the IGST Act contains the provisions for determining the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. As per Section 13(2) generally, the place of supply of services shall be the location of the recipient of services except in case of the services specified in sub-sections (3) to (13) of Section 13 of the IGST Act. In the subject case the prototypes are made physically available by the recipient of services (the overseas clients) to the supplier of services (the applicant). The applicant is providing testing services on physical product samples i.e. prototypes, made available to them in India by their overseas clients in respect of prototypes after due examination and testing of these prototypes. From a reading of the agreement it is very clear that the testing activities that are carried out include Functional tests, Electrical tests, Mechanical tests, Life cycle tests, Endurance tests, Illumination tests, Environmental tests, Software tests, Product robustness tests, etc. - The facts and situation in the present case clearly attract the provisions of Section 13 (3)(a) of the IGST Act and therefore it can be inferred that the said services of testing of the protypes, which are physically made available by the service receiver to the service provider, are provided in India and therefore liable to tax. In the present case it can safely be inferred from a reading of the provisions of Section 13(3) that the services supply of which has been rendered by the applicant to their overseas client as per the agreement is taxable under IGST Act. Applicant relied on the case of COMMISSIONER OF SERVICE TAX, MUMBAI-III VERSUS M/S. SGS INDIA PVT. LTD. [2014 (5) TMI 105 - BOMBAY HIGH COURT], but the facts in that case was entirely different - In that case the overseas clients of SGS used the services of SGS in inspection/ test analysis of the goods which the clients located abroad intended to import from India. The tests were conducted on sample goods and the said goods were not made physically available by their overseas client. In fact the overseas clients would import the goods only after the goods were tested by SGS and a report was sent to that effect. The import would occur only the reports sent were found to confirm that the goods imported complied with requisite specifications and standards, In the subject case the situation is different. Here the overseas client had made the goods physically available to the applicant in order to enable them to conduct the tests. If the goods were not made physically available to the applicants for testing purposes, the tests could not have been conducted and therefore no reports could be generated - thus, the facts of the SGA case are different from the facts of the subject matter. Ruling:- The testing services being provided by the applicant in the present case is liable to IGST and cannot be treated as zero rated supply.
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2018 (11) TMI 886
Levy of IGST u/s 5 (3) of IGST act, 2017 - supply of lottery tickets by the organising state - applicability of Serial No.5 of N/N. 4/2017 - Integrated Tax (Rate) - Reverse charge mechanism - Held that:- Applicant is recipient of supply in the form of lottery and is located in Maharashtra. The supplier of lottery is the State Government of Mizoram which is located outside State. Therefore as per the provisions of Section 7(1) of the IGST Act, the transaction shall be treated as a supply of goods in the course of “interstate” trade or commerce - In view of Section 5(3) of the IGST Act, N/N. 4/20171ntegrated Tax (Rate) dated 28.06.2017 has been issued which provides the description of goods in respect of which Integrated Tax shall be paid on Reverse Charge basis by the recipient of the Inter-State supply of such goods. The supplier of Lottery in the present case is the State Government of Mizoram and the recipient of supply i.e. Lottery distributor or Agent, is the applicant in the present case who is located in Maharashtra and therefore the applicant is liable to payment of IGST under Reverse Charge mechanism as per the provisions and Notification referred. Ruling:- Applicant is liable to pay IGST under section 5 (3) of IGST Act, 2017. Serial No.5 of Notification No. 4/2017 - Integrated Tax (Rate) is applicable on supply received by the applicant.
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2018 (11) TMI 885
Levy of GST - Sale and/or Purchase of DFIA licenses - whether the ‘Duty Free Import Authorization (DFIA) license’ is a ‘Duty Credit Scrip’ as defined under GST laws? Held that:- Duty credit scrips are issued under MEIS and SEIS scheme and can be used to pay various duties/ taxes to the Central Govt. It is issued to exporters of goods/services under FTP(Foreign trade Policy) and is freely transferable. Duty credit scrip’s can be used for payment of specified duties of the customs on the imported goods. Duty credit available can only be utilized to pay custom duty liabilities. DFIA license are also freely transferable as duty credit scrips are. Duty Credit scrips are value based whereas DFIA is predominantly quantity based. Both the Duty Credit scrips and DIFA Licences are freely transferable and can be used for payment of specified ‘duties of the customs on the imported goods. Duty Credit Scrips and DFIAs are not one and the same or similar at all. They are different incentives given to exporters with different conditions and have been separately defined and explained in different Chapters of the FTP. Even though both are an incentive to exporters to promote and increase exports from the country, both the schemes are used in different circumstances and in different manner. When the FTP itself has segregated the two in different Chapters with different procedures, it would not be proper to consider the two schemes as one and the same - DFIA is distinguishable from ‘Duty Credit Scrips’ and cannot be considered as a Duty Credit Scrip as envisaged under the Serial No. 122A of Notification 1/2017 Central Tax (Rate) inserted vide Notification No.35/2017-Central Tax(Rate) dated even though it falls under CTH 4907 Ruling:- GST is applicable on Sale and / or Purchase of DFIA licenses.
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2018 (11) TMI 884
Levy of GST - Penal interest - Taxable supply or not - activity of collecting penal interest by the Applicant - default in repayment of EMI - tolerate an act or a situation of default - penal interest for the purpose of exemption under Sr. No. 27 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, Sr. No. 27 of Maharashtra State Notification No. 12/2017-State Tax (Rate) dated 29.06.2017, and Sr. No. 28 of Notification No. 9/2017 Integrated Tax (Rate) dated 28.06.2017. Held that:- The Applicant, a non-banking financial company are providing various types of loan such as auto loans, loan against the property, personal loans, consumer durable goods loans, etc, to their customers and charge interest on such loans disbursed, for which they enter into agreements with borrower/customers. The agreements provide for repayment of the loan in the form of Equated Monthly Installments (EMI) vide cheque/ Electronic Clearing System (ECS), etc. - The EMI paid by the customers is a fixed amount payable at a specified date, which includes both interest and the principal amount. In cases of delay in repayment of such EMI by the customers, the Applicant collects penal/default interest (penal interest), in terms of the agreements executed by the customers. The same is calculated at a percentage not exceeding a fixed percentage, on the overdue loan amounts of the customer. The percentage of penal interest varies from customer to customer. The amounts collected by the applicant from their customers are nothing but amounts towards Penalty / Penal Charges and can in no way be construed as additional interest. Such penalty/ penal charges are collected by them from their customers for the reason that the said customers have delayed the payment of EMI and the applicant has tolerated the said act of their customers of delaying payment of such EMI. The applicant has agreed to do an act (the act of tolerating, of delayed payment of EMIs by their customers) and such act, by the applicant, squarely falls under clause 5(e) of the Schedule II mentioned above and therefore the amounts received by the applicant for having agreed to do such an act, would attract tax liability under GST laws - The receipt of penal charges on delayed payment of EMIS would be receipt of amounts for tolerating the act of their customers for having delayed/defaulted on their EMI payments within due dates In view thereof, the same would definitely be a ‘supply’ under the GST Act and therefore, there arises an occasion to levy tax under the GST Act on the impugned transactions. There is a clear understanding or agreement between the parties to foresee and tolerate an act or a situation of default on the part of loanees for a monetary consideration which is actually a consideration received by the applicant, though in the agreement they may be giving this consideration, other names such as ‘penal interest’, penal charges, penalty, etc. as thought proper by them, but these different nomenclatures in their Agreement would in no way change the actual nature of monetary “consideration” which would clearly be taxable for the supply of services as per Sr.No. 5(e) of Schedule Il of the CGST Act, 2018. The exemption for financial transactions under GST laws is only in respect of the interest/discount earned or paid for loans, deposits or advances. If the transaction, as in the subject case deviates from the above the same fails the test of being a “loan”, ‘“deposit” or “advance”, or the consideration is not an interest or discount, the exemption is not admissible - In the subject case the amount of penal charges cannot be said to form a part of interest on “loan”, “deposit or “advance”. It is recovered/imposed only because the loanee has delayed the payment of EMI (which consists of the principal amount and interest amount). This recovery of penal charges is made in view of toleration of the act of the loanee by the applicant and therefore construes as ‘supply’ as per as per Sr. No. 5(e) of Schedule II of the CGST Act and is therefore taxable under the GST Act. Ruling:- The Penal Interest will not be treated as interest for the purpose of exemption under Sr. No. 27 of Notification No. 12/2017Central Tax (Rate) dated 28.06.2017, Sr, No. 27 of Maharashtra State Notification No. 12/2017-State Tax (Rate) dated 29.06.2017, and sr. No. 28 of Notification No. 9/20171ntegrated Tax (Rate) dated 28.06.2017. The activity of collecting penal interest by the Applicant would amount to a taxable supply under the GST regime - The said activity squarely falls under clause 5(e) of the Schedule II of the GST Act, 2018 and therefore such amounts received, would attract tax liability under GST laws.
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2018 (11) TMI 883
Levy of GST - education and training programmes conducted through its 13 co-operative training centres and 33 district co-operative boards by charging fees to participants - non-profit making body - services provided by them are not in respect of their own students, faculty and staff - Sr. No. 66(a) of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017. Held that:- Section 24A is applicable to members of societies so that they can effectively understand participate in the management of the society. The said section also says that every society shall contribute annually towards the education and training fund of such State federal societies State Apex Training Institutes, notified under subsection (1), at such rates as may be prescribed, and different rates may be prescribed for different societies or classes of societies. Hence it is clearly seen that there is no funding from the Government directly or indirectly to the applicant as claimed by them in their submission and also that there may be other such State Federal Societies and State Apex Training Institutes which have been notified for providing such education/coaching/ training. Applicant are neither providing any services to the Central Government, State Government, Union territory administration under any training programme nor is the expenditure borne by the Central Government, State Government, Union territory administration. In their case they are funded by the fees received from the societies for the training of their members - they cannot be considered as an educational institution providing services to its students, faculty and staff and therefore the supply of services by them to the members of the cooperative societies do not get exemption given under Sr. No. 66(a) of Notification No. 12/2017-CT (Rate) and No. 9/2017-11 (Rate) both dated 28-6-2017. There appears to be no funding by the Government whether direct or indirect. The Societies Act referred above, vide Section 24A has laid down that every society shall organise co-operative education and training, for its members, officers and employees from the applicant or other notified institutes and every society shall contribute annually towards the education and training fund of the State federal societies or State Apex Training Institutes. Hence it is very clear that there is no funding by the Government in this case. Services provided by them are not in respect of their own students, faculty and staff - Held that:- Services supplied /provided by an educational institution to its students, faculty and staff is exempt from GST - Sr. No. 66(a) of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017. They are in fact supplying services to other cooperative societies and their members and not to their own faculty, etc. Hence there is no way that their remuneration recovered from the societies can be treated as non-taxable. The applicant is supplying services to their Member Societies, against a consideration received from them in the form of Annual fees and their supply is in furtherance of business as defined under Section 2 (17) (e) of the Act - the applicant is a person (as defined under Section 2(84) of the GST Act, Who is supplying services (as defined under Section 7(1) of the GST Act) in the nature of educational, coaching and training to its members only (and not non members), for a consideration (as defined under Section 2(31)). The applicant is not funded in any way by the Government. Ruling:- The applicant's activity is covered within the scope of supply of services and there is no exemption in respect of their supply as per detailed discussions above and therefore the same is liable to GST at applicable rates.
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Income Tax
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2018 (11) TMI 882
Chargeable income u/s 29 - whether once the claim of the appellant as 'business' of accommodation entries is accepted, then the 'charge' has to be computed in accordance with the 'integrated scheme of taxation' of Income Tax Act, 1961? - Held that:- As per office report, defects have not been cured. Four weeks' time is granted to the counsel for the petitioner to cure the defects failing which the petition shall stands dismissed without reference to the court.
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2018 (11) TMI 881
Exemption as granted u/s 10(19A) - the legal heirs of the original Ruler are no longer Ruler - contention emphasised was ‘palace’ not ‘Ruler’ - Held that:-Since the tax effect is below the prescribed limited as per the Circular issued by the Central Board of Direct Taxes, we are not inclined to interfere with the impugned order and more so when it does not involve any substantial question of law also. The special leave petition is, accordingly, dismissed.
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2018 (11) TMI 880
Penalty u/s 271(1) - search procedure pursuant to notice issued u/s 153A - Held that:- SLP dismissed.
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2018 (11) TMI 879
Penalty u/s 271 [1](c) - disallowance of interest expenditure u/s 14A - No evidence of assessee not disclosing the income or source of income - Held that:- SLP dismissed.
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2018 (11) TMI 878
Nature of loss - capital loss or Loss revenue loss - incurred from the transactions relating to the mutual fund units - whether there was evidence available on record to indicate that the intention of the assessee was to treat the holding as stock-in-trade? - Held that:- It is clear that the assessee has stated that they are a financial service company rendering financial advisory and syndication services. Apart from that, the assessee is also trading in shares, units of mutual funds, etc. Memorandum of Association of the Company authorizes the Company to deal in shares and services vide its main objects clause. Further, it is stated that as authorized, the assessee had made mutual funds units during the financial year 2000-01 and sold the units during the same year. The trading in such units was done in the ordinary course of its business and as such revenue in nature. It does not amount to capital asset to be attracting Capital Gain Tax. Further, the assessee stated that the company has treated the transaction as revenue transaction and debited the loss incurred to profit and loss account as revenue expenditure and more particularly, in the earlier financial year also i.e. 2000-01, transaction was treated as revenue expenditure and the same was allowed by the AO. We find that the Tribunal erred in coming to a conclusion that there was no evidence available on record to indicate that the intention of the assessee was to treat the holding as stock-in-trade. AO came to the conclusion that it is a capital investment, because, the assessee was a financial services company. Memorandum of Association of the Company authorised to deal in shares and services. Furthermore, for all the previous assessment years and the subsequent assessment years, similar transactions have been held to be revenue in nature and for the assessment year 2006-07, AO did not agree with the assessee. CIT-A after taking into consideration of the Memorandum of Association of the Company, held that the assessee had acquired equity shares, which it held as stock-in-trade and out of which, a portion was sold incurring a loss which was accounted for as business loss. It held that the method of accounting and the principle of accounting for loss or gains from investments or stock-in-trade have been consistently and regularly followed by the assessee and accordingly, the claim of the assessee with regard to loss arising from trading in shares is to be allowed as a business loss as claimed by the assessee. - Decided in favour of the Assessee
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2018 (11) TMI 877
Addition u/s 14A - Held that:- As decided in GODREJ & BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX & ANR [2017 (5) TMI 403 - SUPREME COURT OF INDIA] expenses allowed can only be in respect of earning of taxable income. Therefore, one needs to read the words "expenditure incurred" in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditure incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax. No mention of the reasons which had prevailed upon the AO, while dealing with the Assessment Year 2002-2003, to hold that the claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances - Decided in favour of assessee.
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2018 (11) TMI 876
TDS u/s 194H - commission payment to various distributors - relation between assessee and distributor is that of principal to agent - Held that:- As decided in M/S IDEA CELLULAR LTD. (FORMERLY KNOWN AS IDEA TELECOMMUNICATION LTD. [2018 (5) TMI 1394 - RAJASTHAN HIGH COURT] the relationship is not of agent - it is principal to principal basis - the payment is received by the company and the amount of commission is never paid to the agent or the distributor - no TDS is required to be deducted - decided in favor of assessee. Management Information System is not a part of the books of accounts and could not be relied upon - Statutory Audit Report is final conclusion over the authorities - Decided in favour of the assessee
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2018 (11) TMI 875
Registration u/s 12AA denied - activities of the society are not genuine - property of the trust on lease or on rent given by trustee - ITAT allowed the claim - Held that:- From the perusal of the clause, we observe that the trustees have been given powers to give property of the trust on lease or on rent. We do not find anything wrong in this clause so as to deny the assessee the registration under Section 12A of the Act. As regards the apprehension of the CIT (Exemptions) that his clause may attract the provisions of Section 13(1) (c) of the Act, we are of the view that the conditions as provided in Section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the CIT (Appeals) while granting registration under Section 12A of the Act. Since we observe that no adverse remarks have been made by the Commissioner of Income Tax (Exemptions) with regard to the objects contained in Memorandum and as stated hereinabove that the observations of the Commissioner of Income Tax (Exemptions) do not lead to the conclusion that the activities of the assessee are not genuine, we hereby direct the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A - Decided against revenue.
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2018 (11) TMI 874
Validity of reopening of assessment - non issuing notice u/s 143(2) - Held that:- As decided in PR. COMMISSIONER OF INCOME TAX-08 VERSUS SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. [2015 (10) TMI 1765 - DELHI HIGH COURT] as no notice under Section 143(2) of the Act was issued to the Assessee the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. Thus failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment. - Decided in favour of assessee.
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2018 (11) TMI 873
Validity of assessment - Requirement of issuance of notice within prescribed time u/s 143(2) - barred by limitation - deemed service of notice - whether ITAT was justified in law in deleting direction of DRP solely on the ground that the notice u/s 143(2) was not served within limitation? - Held that:- Noticeable it is that even in Gyan Prakash Gupta [1985 (7) TMI 9 - RAJASTHAN HIGH COURT], this Court did not hold that omission to serve within time was merely a procedural irregularity. In the said decision, this Court observed that assessment so made without notice under Section 143(2) could only be set aside and not annulled. Be that as it may, now the law declared in Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA) puts it beyond a pale of doubt that the requirement of issuance of notice within prescribed time under Section 143(2) of the Act for the purpose of assessment in case of the AO repudiating the return filed by the assessee in response to the notice under Section 158BC is a mandatory requirement and omission to serve such a notice within time is not a curable irregularity of procedure, as assumed by the ITAT in its earlier order dated 28.04.2006. The order dated 12.10.2012 being squarely in consonance with the requirements of justice, and on the admitted fact situation that the notice under Section 143(2) of the Act was not given in this case within prescribed time, no case for interference is made out. - Decided against revenue
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2018 (11) TMI 872
Applicability of section 50C - Capital gain - Sale of right in land/contingent right - proof of transfer of capital asset - Possession and ownership of the land - Held that:- Tribunal came to the conclusion that Section 50C of the Act of 1961 would apply if there is a transfer of land or building or both. It would not apply in absence of transfer of capital asset. In Para 6.11, the Tribunal found that assessee has transferred only right in the land for valuable consideration, thereby, did not transfer capital asset. The finding aforesaid has been recorded without proper scrutiny of facts. How the land and building or both were disclosed by the assessee in the balancesheet has not been taken note of. It is also as to how it is not transfer of capital asset. If it is reflected as capital asset, transfer thereupon for consideration would attract Section 50C of the Act of 1961 but the aforesaid aspect has not been considered by the ITAT Tribunal, Jaipur Bench, Jaipur. It is nothing but an order without elaborate finding on the issue, that too, after taking into consideration the requisite facts for its adjudication. The appellant has referred judgment of Bombay High Court IN M/S. GREENFIELD HOTELS & ESTATES PVT. LTD. [2016 (12) TMI 353 - BOMBAY HIGH COURT] where it was held that Section 50C of the Act of 1961 would not be applicable on transfer of lease hold rights of the land. Bare perusal of Section 50C of the Act of 1961 does not show that transfer of capital asset for consideration should be other than of lease hold property or khatedari land. The court cannot rewrite the provision. If analogy taken by the Bombay High Court in the case (supra) is applied in general then Section 50C of the Act of 1961 would not be applicable in majority of the cases as not it is allowed as lease hold property. Section 50C of the Act of 1961 is applicable on transfer of capital assets for consideration. The Bombay High Court has not referred as how the land was in the balancesheet. It is as a capital asset or not thus we are unable to apply the judgment of Bombay High Court in the case of M/s. Greenfield Hotels & Estates Pvt. Ltd. (supra). No question of law is involved herein.
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2018 (11) TMI 871
Rectification of Mistake u/s 154 - deduction u/s. 80IB disallowed - Held that:- AO made the assessment u/s. 143(3) and took a conscious and considered view to allow deduction u/s. 80IB of the At in respect of interest from debtors and fixed deposits with Banks; and therefore, now the same cannot be said to be mistake apparent from record; this is clear case of change of opinion; the order does not even mention the nature of amount disallowed; the order does not show any basis, reason or logic to arrive at a conclusion that deduction allowed u/s. 80IB of the Act is mistake apparent from record much less patent and glaring; the assessment order does not point any mistake of fact or application of any law. Hence, in our view there is no mistake apparent on record rectifiable u/s. 154 of the Act, therefore, we quash the orders of the authorities below and allow the deduction in dispute u/s. 80IB of the Act in respect of the interest received from debtors and on fixed deposit with banks. See CIT vs. Krishak Bharti Co-operative Ltd. [2002 (11) TMI 12 - DELHI HIGH COURT] - decided in favour of assessee.
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2018 (11) TMI 870
Bogus Long Term Capital Gains (LTCG) - unexplained cash credits u/s. 68 addition - Held that:- We afforded sufficient opportunity to the Revenue for indicating any material on record indicating the assessee’s nexus with the alleged share price rigging or her name having specifically mentioned in any search statement. There is no such material forthcoming from the case file. We therefore adopt the detailed reasoning given in NAVNEET AGARWAL, LEGAL HEIR OF LATE KIRAN AGARWAL VERSUS ITO, WARD-35 (3) , KOLKATA [2018 (8) TMI 509 - ITAT KOLKATA] and NEERAJ GUPTA VERSUS INCOME TAX OFFICER, WARD-44 (1) , KOLKATA [2018 (11) TMI 805 - ITAT KOLKATA] mutatis mutandis to delete the impugned addition of unexplained LTCG. - Decided in favour of assessee.
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2018 (11) TMI 869
Eligibility for deduction u/ 80G - treatment of donation as bogus - allegation of donations to unscrupulous trusts - Held that:- Just because the trust was engaged in some unauthorized activity does not mean that the assessee is not entitled to claim the benefit u/s 80G of the Act. Besides, the Income Tax Department has failed to prove that the consideration has been received in form of cash or otherwise. Also no opportunity was afforded to the assessee to cross-examine the departmental witness, that is, the statements of whom were relied upon by the officer of investigation wing of the Income Tax Department. Further, no any copies of documents were provided to the assessee which were relied upon by the income tax authority. AO nowhere stated in his impugned assessment order that the any part of income of Trust (institution) has become taxable for any technical reason and also the Ld. AO did not mention that the certificate issued under section 80G(5)(v) has been cancelled by the Income Tax Department. Under these circumstances the deduction under section 80G cannot be denied to the assessee company.We also note that subsequent to the donation, the withdrawal of benefit or cancellation of certificate of section 80G in the hands of the payee would not affect the interest of the assessee. In we direct the AO to grant the deduction u/s 80G of the Act in respect of donation given by the assessee in accordance with law. - Decided in favour of assessee Upward transfer pricing adjustment - addition of interest charged to the assessee’s subsidiary - applicability of LIBOR rate - Held that:- It has been consistently held in several decisions by the tribunal that wherever the transaction of loan between the associated enterprises is in foreign currency then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction. Therefore the domestic prime lending rate would have no applicability and the international rate LIBOR would come into play. It has therefore been held that LIBOR rate has to be considered while determining the arms length rate of interest in respect of transactions of loan in foreign currency between the associated enterprises. This view has also been accepted by the Hon'ble Delhi High Court in the case of CIT vs Cotton Naturals (I) Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT]. Disallowance being 40% of employees contribution towards EPF which was paid beyond the due date - HELD THAT:- in the assessee’s case under consideration, the employee’s contribution towards the PF was made by the assessee before the due date of filing the return of income and thereforeemployee’s contribution towards the PF shall be allowed as deduction u/s 43(b) of the Act, therefore, respectfully following the judgment of Hon’ble Supreme Court in the case of CIT vs Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT) we find no infirmity in the order passed by the Ld. CIT(A) in deleting the addition. Addition u/s 14A read with Rule 8D of the IT Rules - assessee has suo moto disallowed u/s 14A read with Rule 8D - Held that:- Assessing Officer has not mentioned the cogent reasons for rejecting the claim of the assessee in the assessment order.If the Assessing Officer proposes to invoke section 14A then he has to record a satisfaction on this issue. This satisfaction is to be done with regard to the accounts of the assessee. In the present case wenote that there is no satisfaction recorded by the Assessing Officer and therefore, in view of case of Ashish Jhunjhunwala (2013 (6) TMI 545 - ITAT KOLKATA) no disallowance u/s 14A can be made. Therefore, the order passed by the Assessing Officer is a non-speaking order and Ld. CIT(A) has rightly restricted the disallowance u/s 14A to the tune of ₹ 44,338/- suo moto disallowed by assessee. MAT computation - addition of sum disallowed u/s 14A to the book profit of the assessee company u/s 115JB of the Act - Held that:- The provisions of section 115JB relating to computation of book profit are amply clear and unambiguous. These provisions do not leave any room for adjustment by the assessing officer other than those mentioned in Explanation 1 to section 115JB to the net profit reflected in the accounts of any assessee and adjustment by way of disallowance u/s 14A is not included in the said explanation. Therefore, such upward revision in the sum of ₹ 1,48,506/-to the book-profit by making disallowance section 14A r.w.r. 8D is not permitted as per tribunal’s Special Bench’s decision in Vireet Investments (2017 (6) TMI 1124 - ITAT DELHI). That being so, we decline to interfere with the order of Id. CIT (A) deleting the aforesaid addition. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.
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2018 (11) TMI 868
Disallowance of capital loss on sale of property at Gurgaon - Paying extra compensation to trust - forced transfer of property - assessee purchased a flat at Gurgoan for the purpose of usage of the trust activities only and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown for higher amount - attached encumbrance in the form of a contractual obligation. Held that:- The properties at Rajarhat, New Town were purchased from M/s Sunny Rock Estates and Developer P Ltd in the name of Al Habib Welfare & Charitable Trust by the assessee using his own funds. This was done by him as compensation for using the funds of the trust for his personal purposes in the past. From the various correspondences exchanged between the assessee and the said trust as detailed supra, we find that the assessee at the first instance had purchased a flat at Gurgoan for the purpose of usage of the trust activities only. But since the trust refused to accept any property other than in the fringe locality of Kolkata and due to heavy pressure applied by the said trust on the assessee to locate a property in Kolkata for pursuing its charitable objects, the assessee was forced to sell the flat at Gurgoan and utilize the proceeds thereon for purchasing a property at Rajarhat, Newtown in the name of the trust for a higher amount due to huge rise in real estate market and due to effluxion of time. But it cannot be brushed aside that the assessee was having the said flat at Gurgoan together with an attached encumbrance of amounts drawn by him from the said trust which had to be compensated in future either in cash or in kind for the benefit of the trust. Hence there was an attached encumbrance in the form of a contractual obligation to be fulfilled by the assessee to the trust. As decided in COMMISSIONER OF INCOME TAX, KOL-XI VERSUS SATYABRATA DEY [2014 (5) TMI 781 - CALCUTTA HIGH COURT] unless the assessee had settled the dispute, the sale transaction could not have materialised and the sale consideration had to be reduced by the amount of compensation paid – the expression used in section 48 of the Act, expenditure incurred wholly and exclusively in connection with such transfer has wider connotation than the expression, ‘for the transfer’ - the transfer would not have taken place and the payment has necessarily to be made for the transfer of the hotel - the sum was expended by the assessee wholly and exclusively in connection with the transfer of the capital asset and not de hors the transfer – Decided against Revenue.
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2018 (11) TMI 867
Charitable activity - Rejection of the application for registration u/s 12AA - objects of encouraging cricket match by the said trust is nothing but commercial activity - Earnings by way of sponsorships, sale of broadcasting rights, ground advertisements and sale of expensive tickets are in the nature of commercial activities and hit by the proviso of Section 2(15) - Held that:- CIT while dealing with the application for grant of registration of limiting its jurisdiction within the aspect of its objects unnecessarily exceeded to the issue of income derived by the Trust spend for charitable purposes and the profit earned by the Trust which is supposed to be done by the Assessing Officer at the time of considering the claim of the assessee for exemption u/s 11 of the Act if needed. No defect was detected by the Learned CIT in the application for registration of the trust so placed before it by the assessee. No reason in the order passed by the Learned CIT in rejecting the claim of Registration of the assessee’s Trust in the absence of any lacuna of the details submitted by the assessee with the application u/s 12A of the Act. The order passed by the Ld CIT is therefore, quashed with a further direction upon him to allow such registration u/s 12AA of the Act. - Decided in favour of assessee
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2018 (11) TMI 866
Revision u/s 263 - allowability of the claim of business loss on currency swap - allowable revenue expenditure - expenditure i.e. foreign exchange fluctuation related to capital assets - Held that:- Admittedly the loss on currency swap is an event subsequent to the acquisition and put to use of the asset for business and therefore, following the ratio of the Supreme Court decision in Tata Iron Steel Co. Ltd [1997 (12) TMI 5 - SUPREME COURT], which has been relied by coordinate bench of Pune Tribunal in Cooper Corporation (P) Ltd [2016 (5) TMI 809 - ITAT PUNE], such loss cannot alter the cost of asset and is rather allowable as revenue expenditure. Thus, the ratio of the judgment of Hon’ble Sutlej Cotton Mills Ltd [1978 (9) TMI 1 - SUPREME COURT] is not applicable in the instant case and the assessment order cannot be erroneous in law. Therefore, clause (d) of Explanation 2 of section 263 is not fulfilled. The loss claimed by assessee on account of fluctuation loss is revenue loss and the assessee is entitled for its deduction. Therefore, the order passed by assessing officer is not erroneous. Considering the fact that the twin condition as enunciated by Hon’ble Apex Court in case of Malabar industrial companies Ltd [2000 (2) TMI 10 - SUPREME COURT] are not fulfilled, therefore, the order passed by assessing officer cannot be subject matter of revision. Therefore, the revision order passed by learned PCIT is not sustainable - Decided in favour of assessee.
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2018 (11) TMI 865
TDS u/s 194C - non deduction of TDS while making the payment to the agencies – Bhagyashree Developer, Jaaji Developer and Jaaji Promoters who have developed the residential complex for the employees - Held that:- When the assessee is only a purchaser, if any advance sale consideration is paid, the assessee has no business to deduct the tax at source as it is for the seller of the sites to pay the capital gains depending upon the tax payable by him. See THE COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, BANGALORE VERSUS M/S KARNATAKA STATE JUDICIAL DEPARTMENT [2010 (3) TMI 1211 - KARNATAKA HIGH COURT] - Decided against revenue.
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2018 (11) TMI 864
TP adjustment - certain Bank Guarantee being provided by the assessee to its Associated Enterprises [AE]. - Held that:- As relying on assessee's own case [2017 (1) TMI 1519 - ITAT MUMBAI] we restrict the rate of impugned additions to 0.50% as against 2.25% taken by the lower authorities. This ground stand partly allowed. The Ld. AO is directed to modify the final assessment order to that extent. TP adjustment - assessee under contractual terms, had granted certain loan to one of its Associated Enterprise [AE] namely Laqshya Media International, Mauritius [LMI] for the purpose of further lending to step down subsidiaries and for acquiring the shares of overseas entities by the aforesaid AE - Held that:- The fact remains the same that the assessee has advanced loan pursuant to loan agreements / arrangements to its AE and was entitled to certain rate of interest. These loan transactions as entered into by the assessee with the AE squarely falls within the ambit of Section 92(1) / 92B as an international transactions as accepted by the assessee in its TP study and the statutory provisions mandates that the income from such transactions is to be computed on the principle of arm's length price irrespective of the fact that no such income has actually accrued to the assessee. This being so, the argument of principles of commercial expediency or notional income or revenue neutrality as raised before us fails since as long as the transaction is an international transaction within the framework of law, the computation of income there-from has to be on the basis of arm's length principle. Applicable interest rate - AR has supported the argument that the same should be benchmarked at LIBOR - admission of additional evidence - Held that:- Since additional evidences have been placed before us for the first time which are germane to the adjudication of the issue and the fact as to the currency in which the loan was granted and the currency in which it was repayable is not quite certain, the issue requires re-appreciation by lower authorities. For the aforesaid limited purpose, the matter stand remitted back to the file of AO / TPO with a direction to the assessee to provide requisite details & information to substantiate the claim. This ground stand partly allowed for statistical purposes. Interest disallowance u/s 36(1)(iii) - interest paid towards working capital loans obtained by the assessee was disallowed and added back to the income of the assessee. Held that:- Similar facts exist in the impugned AY and there is no material change in the factual matrix. Further, there is only a marginal increase of ₹ 0.53 Crores in loans granted by the assessee to its subsidiary during the impugned AY. Therefore, respectfully following the consistent stand of the Tribunal in assessee’s own case for AYs 2010-11 & 2011-12, the impugned additions of ₹ 214.05 Lacs stand deleted. The suo-moto disallowance of ₹ 194.10 Lacs as made by assessee while computing its income remain intact since the same has been added back in terms of the provisions of Section 43B. Disallowance u/s 14A - Held that:- After perusal of decision of Special Bench of Delhi Tribunal in ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI], we observe that the special bench, after considering catena of judicial pronouncements, has arrived at conclusion that only those investments are to be considered for computing average value of investments which yielded exempt income during the year. Respectfully following the same, we direct Ld. AO to recompute the disallowance after considering only those investments which have yielded exempt income during the year. The assessee is directed to provide requisite details in this regard. MAT - adjustment of disallowance u/s 14A in computation of book profit u/s 115JB - Held that:- Decision in PCIT Vs. Bhushan Steel Ltd. [2015 (9) TMI 1424 - DELHI HIGH COURT] held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115J. We hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Respectfully following the catena of judgment in assessee’s favour, we hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Certain incomes as reflected in Form 26AS not found to be credited in the Profit & Loss Account and the income to the extent of ₹ 1.02 Lacs could not be reconciled by the assessee - Held that:- Upon due consideration of factual matrix, we find that onus to reconcile the entries was on assessee. Since impugned order was passed on 31/01/2017, Ld. AO is directed to re-appreciate the entries in Form 26AS and re-adjudicate the same in the light of the confirmations / any other evidences received after the date of the impugned order. This ground stand allowed for statistical purposes. Short Grant of TDS Credit - Held that:- As per Ld. AR’s submissions, complete TDS reconciliation has already been filed before lower authorities. AO is directed to verify the same and grant TDS credit as per law which has accrued to the assessee during impugned AY. This ground stand allowed for statistical purposes.
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2018 (11) TMI 863
Income accrued in India - Royalty receipt - consideration received from Indus Tower Ltd., for supply of software - considering Indian subsidiaries as PE of the assessee - India-Isreal DTAA - Held that:- As discussed by the Tribunal in assessee’s own case, we hold that amount received by the assessee are not in the nature of royalty as per Article 12 of India-Isreal DTAA is not taxable as such in India, but has to be treated as business profit of the assessee. Treating the DTAA India as an independent agent PE of assessee - Held that:- The Tribunal in assessee's own case in A.Y. 2006-07 clearly held that assessee had no permanent establishment in India. It is further noted that TTI India has entered into the agreement on independent basis. No facts have been discussed by the Ld. CIT(A) to show that how the judgment of Rolls Royce PLC was applicable in the preference of the decisions of the Tribunal rendered in assessee's own case. Under these circumstances, we do not find any reason to deviate from the order of the Tribunal of the earlier years. TTI India cannot be treated as assessee's dependent agent PE in India, hence, the amount so received is not taxable at the hands of the assessee. The grounds are allowed. Non giving credit of the tax deducted at source - Held that:- We direct the AO to verify the factual figures and after verification allow necessary credit for the tax deducted at source.
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2018 (11) TMI 862
TPA - ALP determination - selection of MAM - application of CUP method - allocation of software cost - Held that:- This issue squarely covered by Tribunal decision in assessee’s group company in case of Firmenich Aromatics India Pvt.Ltd Vs Dy. CIT [2018 (9) TMI 1007 - ITAT MUMBAI] the material submitted before us, which also forms part of the Transfer Pricing Officer's record, indicates that the cost of the software has been allocated to 40 group companies across the globe who are using the software and related services and assessee's share in cost allocation works out to 2.3%. Moreover, when the Transfer Pricing Officer himself agrees that the AE has provided software and certain services, there is no reason for not accepting the payment made to the AE to be at arm's length in the absence of any contrary evidence brought on record and by simply applying the benefit test. If the Transfer Pricing Officer did not agree to the arm's length price shown by the assessee it was open for him to determine the arm's length price by applying one of the most appropriate methods being backed by supporting material. Without complying to the statutory provisions, the Transfer Pricing Officer certainly cannot determine the arm's length price on ad-hoc / estimation basis. Thus we delete the adjustment made to the arm's length price of payment made towards availing information system services from AE - decided in favour of assessee.
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2018 (11) TMI 861
Disallowing the claim of Security Charges on ad-hoc basis - non allowable business expenses - Held that:- The security charges for earlier year was disallowed at ₹ 1,48,540/- paid to Krishna Plastic site out of the total claim of the assessee at ₹ 4,46,480/-. There is increase in overall security charges to ₹ 8,14,896/- i.e. which almost double of the earlier year. From the order of lower authorities it is clear the neither genuineness nor expenses as business expenditure was doubted. We find that in earlier year disallowance was at ₹ 1,48,540/- and hence, we restricted the disallowance in this year at ₹ 1 lac. This issue of the assessee’s appeal is partly allowed. Disallowance of deprecation claimed on Crane Crawlers - Held that:- We noted that these cranes and crawlers purchased in 2009 (details are cited above). Accordingly, the assessee’s claim for depreciation was allowed in earlier years and taking the same facts in this year, depreciation cannot be disallowed. Accordingly, we allow the claim of depreciation and this issue of assessee’s appeal is allowed. Depreciation on motor car, interest and vehicle expenses disallowed - motor car was not purchases in the name of the assessee company once the same was purchased in the name of the directors - Held that:- As decided in DCIT vs. Kaytee corporation [2017 (4) TMI 814 - ITAT MUMBAI] depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. As the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - Decided in favour of assessee. Addition of share application/ share premium treating the same as unexplained cash credit under section 68 - Held that:- As decided in CIT vs. Orchid Industries Pvt. Ltd. [2017 (7) TMI 613 - BOMBAY HIGH COURT] Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money.Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. - Decided against revenue.
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2018 (11) TMI 860
Claim of exemption u/s 54 - purchase of the new asset within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of 3 years from the date on which the transfer took place - utilization of the LTCG before the date of furnishing the ‘return of income’ u/s 139 - Held that:- Subsection (2) of Sec. 54 contemplates two situations viz. (a) a case where the assessee had appropriated the amount of LTCG towards acquisition of the new asset within a period of one year before the date on which the transfer of the original asset took place or for the purchase or construction of the new asset before the date of furnishing the return of income under Sec.139; and (b) a case where the assessee had not appropriated the amount of the capital gain before the date of furnishing the ‘return of income’ u/s.139, there he shall be eligible to claim exemption u/s 54 towards purchase of the new asset within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of 3 years from the date on which the transfer took place, subject to a rider that the assessee should have deposited the amount of capital gain in a CGAS account with a specified bank by not later than the ‘due date’ applicable in his case for furnishing the ‘return of income’ under sub-section (1) of Sec.139. We find that the case before us clearly falls within the sweep of the aforementioned first limb of sub-section (2) of Sec.54. As the assessee in the case before us had appropriated the amount of the LTCG towards purchase of the new residential property viz. Flat A-203, Crown @ Hiranandani, Thane on 22.04.2014 i.e before the date contemplated under Sec.139(4), thus by having utilized the LTCG before the date of furnishing the ‘return of income’ under Sec. 139, his claim of exemption under Sec. 54 is found to be in order. - decided against revenue.
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2018 (11) TMI 859
Computation of capital gain - Addition on account of conversion of cumulative and compulsory convertible preference shares (CCPS) into equity shares treating the same as transfer within the meaning of section 2(47) - Held that:- According to us, there is no leakage of revenue if such interpretation is adopted. Not only this interpretation would be in furtherance to the legislative intention but would also make the competition provision of capital gain work smoothly, in synchronization with other provisions, without any conflict with other provisions. On the other hand, if the view is adopted that capital gain tax liability arose upon conversion, the same would be not only against the legislative intention but also would make the composition of capital gain unworkable and would bring conflict with other provisions of the Act. In fact, the contrary interpretation would lead to double taxation in as much as, having taxed the capital gain upon such conversion, at the time of computing capital gain upon sale of such converted shares, the assessee would be still taxed again, as the cost of acquisition would still be adopted as the issue price of the CCPS and not the consideration adopted while levying capital gain upon such conversion. By so starch of imagination, such interpretation process is permissible. We are of the view that conversion of CCPS into equity shares cannot be treated as ‘transfer’ within the meaning of Sec. 2(47) of the Act and hence, we delete the addition and allow this issue of assessee’s appeal. Addition on account of notional interest @ 7% on capital balance in the partnership firm as income of the assessee - Before us, assessee contended that the deed was not modified pertaining to the below changes and thus, the same has not been registered with the Registrar of Firms - Held that:- the supplementary deed entered by the assessee was duly executed on a stamp paper and as such, holds legal validity. Now, before us, ld. Counsel stated that even under section 40(b) of the Act, which provides the allowance for remuneration and interest expense of partners for a partnership firm does not provide for a requirement to have the partnership firm registered in order to allow the expenses in the hands of the firm. Even otherwise, the income has not accrued to the assessee we find that these facts need verification and hence, the same are restored back to the file of the AO. This issue of the assessee’s appeal is allowed for statistical purposes. Assessment under MAT computation u/s 115JB in respect to long term capital gain added by AO on conversion of cumulative compulsory preference share into equity share and notional interest on capital balance - Since we have already adjudicated the first issue of long term capital gain in favour of assessee, gain not to be charged to capital gain and the issue of notional interest set aside to the file of the AO, this issue has been academic and hence needs no adjudication.
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2018 (11) TMI 858
Addition on account of interest payment - assessee has given loans/advances of ₹ 1,00,96,320/- free of interest whereas the assessee has incurred interest expenditure of ₹ 8,75,543/-. - Held that:- it is the assessee’s decision to advance moneys on the basis of commercial expediency with or without interest and the fact that the A.O could not prove any adverse nexus between the two parties and the assessee firm., it is opined that the disallowances of interest on proportionate basis to the extent of ₹ 8,75,543/- by the assessing officer was not warranted. The same is accordingly directed to be deleted. - Decided against revenue Addition u/s 68 for unexplained credit on account of unsecured loans - Held that:- We note that all the six creditors have produced the confirmations, returns of income as well as their relevant record from the books of account to show that the transactions of loans given to the assessee were duly recorded in the books of account and through banking channel. AO conducted the enquiry and in response the relevant supporting evidences were filed by these creditors. Thus it is clear that despite receiving the supporting evidence directly from the creditors, the AO has made the addition by citing the reason that the assessee did not produce supporting evidence CIT (A) has examined the evidences available on the assessment record and found that the AO was having all the relevant details and supporting evidence during the assessment proceedings as called for under section 133(6) of the Act. On examination of these details and evidence as submitted by the six creditors, we find that the claim of the assessee was duly supported by the evidence produced by the creditors who having confirmed the transactions and also produced the evidence regarding their creditworthiness as all these creditors filed their returns of income, their ledger account and bank statements showing the transactions of loans given to the assessee.- Decided against revenue Addition by applying the GP rate of earlier year - Held that:- AO has to estimate the income of the assessee by taking a reasonable and proper basis and average of the past GP declared by the assessee can be a good guidance. Since this is the second year of the business, therefore, only two years are available for considering the average of the GP. Hence in the facts and circumstances of the case, when the variation in the GP is insignificant and there is an increase in the turnover of the assessee of more than three times from ₹ 9,60,00,000/- to ₹ 28,69,00,000/- then there is no justification of making addition by applying the GP rate of earlier year. Accordingly, in the facts and circumstances of the case, we delete the addition made by the AO on this account. - Decided in favour of assessee
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2018 (11) TMI 805
Bogus Long Term Capital Gains on purchase and sale of the shares - claim of exemption made u/s 10(38) rejected - Held that:- The overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. There is no surviving order of SEBI against the assessee or the company, the script of which was purchased and sold by the assessee. When there is no surviving adverse order of SEBI, against the claim of the assessee, the judgment of the Hon’ble Supreme Court in the case of Securities and Exchange Board of India vs Rakhi Trading Private Ltd [2018 (2) TMI 580 - SUPREME COURT OF INDIA] cannot be applied to the facts of this case. Addition in question is deleted and the appeal of the assessee is allowed.
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Customs
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2018 (11) TMI 857
Concessional rate of duty - import of components at concessional rate of duty for manufacture of mobile phone and LED/LCD televisions at their factory in Uttarakhand - Held that:- The appeal is admitted - Issue notice on the application for stay.
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2018 (11) TMI 856
Principles of natural justice - opportunity of cross-examine not provided - Imposition of penalty on freight forwarding agency, customs house agent and its proprietors - Ineligible availment of higher drawback - mis-declaration of quantity, description and value - Held that:- When the entire case is based on the statement of those employees, the veracity of which was not tested by permitting the appellants to cross examine them, the same cannot be considered as a complete piece of evidence on which reliance can be placed. Such an order passed by the original adjudicating authority and the Commissioner (Appeals) are in gross violation of principles of natural justice and therefore it is a fit case which is required to be remanded back for re-adjudication. Section 128A(3) empowers the Commissioner (Appeals) to make such further enquiry as may be necessary to pass such order as he may think proper - the Commissioner (Appeals) can exercise power vested with adjudicating authority in accepting evidence and making further enquiry as he deems proper after providing opportunity to the appellant to cross examine the witnesses. Appeal allowed by way of remand.
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2018 (11) TMI 855
Revocation of CHA License - Forfeiture of security deposit - it was alleged that appellant has failed to sensitise the importer regarding the obligations under the Customs Law and Foreign Trade Policy - violation of Regulation 11(d) of the CBLR, 2013 - time limitation to issue enquiry report - Held that:- The Regulation 20(5) of the CBLR, 2013 specifies that the enquiry report on alleged offence is required to be made available to the Customs Broker within a period of 90 days from the date of show cause notice proposing action under CBLR, 2013 - In the present case the show cause notice has been issued on 22.06.2017, but after conclusion of the enquiry the report has been made available to the appellant only on 24.11.2017, even though the same has been signed on 09.10.2017. This is clearly after the period of 90 days specified in the Regulation 20(5). Non-observance of this time limit itself will render the proceedings liable to be quashed. There is no specific evidence produced by the Revenue to the effect that appellant have failed to comply with the Regulation 11 (d). The Jurisdictional Commissioner, while adjudicating the customs offence has also absolved the appellant from imposition of any penalty under the Customs Act. He has further observed in passing in the Order that the appellant cannot be held under Regulation 11(d). There is no justification for the extreme steps taken by the lower authority in ordering for forfeiture of the security deposit and revoking the customs broker license - appeal allowed - decided in favor of appellant-CHA.
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2018 (11) TMI 854
Classification of imported goods - second hand Ocean Going Deck Barge named “Pyaree Amma” - classified under CTH 8901.1040 or under CTH 8905.9090 of Customs Tariff Act? - Held that:- The capacity of the vessel has been mentioned in the International Merchant Marine Registry of Belize as gross tonnage – 4691 tons and net tonnage – 1407 tons. Thus it is evident that there was capacity of about 1407 tons in the vessel in question. Being a Pontoon, it has no navigability on its own. It has two cranes and a diesel genset. There are holds in deck level in the form of hoppers constructed to hold homogenous cargoes on the vessel. Thus, it is a Pontoon with some carrying capacity and also with two cranes and is not navigable on its own but can be towed. The pontoons which by definition are not navigable on their own but need to be towed fitted with lifting and handling machines such as present one are classifiable under chapter heading 8905.9090 - there is no infirmity in the impugned order classifying pontoons in question under 8905.9090 - appeal dismissed - decided against appellant.
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2018 (11) TMI 853
Interpretation of statute - N/N. 62/2007-Customs - Export of Iron Ore - demand of export duty - Held that:- In this case, there are two doubts. One is regarding the authenticity of the sample drawn by the independent test agency without presence of the customs officers and the other is whether the test report of the CRCL is on wet basis or dry basis. The benefit of both these doubts will go in favour of the revenue for the simple reason that the exemption notification has to be strictly construed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 852
Penalty u/s 114 (i) and 114 (iii) of the Customs Act, 1962 - exports of overvalued and sub standards goods - imposition of penalty based on telephonic conversations with Shri Kirt Shrimankar - Held that:- Shri S. Chattaraj was not involved in conspiracy with Shri Kirit Shrimankar towards exports of overvalued and sub standards goods. There is no transcript of phone calls made between these two to reach a conclusion that the said conversation was in order to cause fraudulent export. Only on the basis of familiarity between the two, it cannot lead to inference of Appellant having committed any illegal act. In case of other, who are Inspectors & Superintendents, we find that there is no evidence of these Appellants getting any favour from Shri Kirit Shrimankar or any other person - when the appellants are not accused of getting any illegal gratification or advantage from the alleged exporter, they cannot be held responsible for any alleged evasion of duty or causing fraudulent exports. Penalty not imposable - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2018 (11) TMI 893
Initiation of Insolvency Resolution Process - Acknowledgement of liability - Held that:- In the present case the acknowledgement of liability dated 31.08.2015 in the form of letter (Annexure-5) is sufficient to fulfil the requirement of Section 18 of Limitation Act. The present application was filed on 09.05.2018 which is much prior to three years. Therefore, the objection concerning the limitation period is wholly without substance and the same is hereby rejected. The objection with regard to calculation of amount would also not require any serious consideration. Section 4 of the Code, 2016 provides that if an amount of ₹ 1,00,000/- or more is due then that can be sufficient to initiate CIR Process. In the present case the default is in crores and objection regarding calculation is left open. It may be decided by CoC. The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of 'Corporate Debtor' and specific mention regarding admission of this petition must be notified.
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2018 (11) TMI 892
Corporate insolvency process - outstanding workman’s due - Held that:- Each workman’s due is more than rupees one lakh and the ‘Corporate Debtor’ having defaulted to pay the amount, the application was fit to be admitted. The Adjudicating Authority having failed to consider the aforesaid fact, we have no other option but to set aside the impugned order dated 3rd January, 2018 and remit the matter to the Adjudicating Authority to admit the application. In the result, the Adjudicating Authority is directed to admit the application filed by the Appellant- Mr. Suresh Narayan Singh and pass appropriate order of ‘Moratorium’ and appointment of ‘Insolvency Resolution Professional’ in accordance with law after notice to the ‘Corporate Debtor’.
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2018 (11) TMI 891
Misconduct by insolvency professional - misleading and false statements before the DC - Held that:- Mr. Golla confirmed that the resolution plan did not contravene any of the provisions of any law, even though he knew that Mr. Mahendra Wig was ineligible under section 29A of the Code to submit resolution plan. As orchestrated, the CoC, which comprised only BoB, approved it. Thus, Mr. Golla connived with the parties to allow an OTS in the garb of resolution plan and to allow an ineligible RA to submit the OTS and did absolutely nothing either to run the business of the CD or to run the CIRP. As to how an OTS was considered as resolution plan, Mr. Golla justifies that even Supreme Court does it in exercise of its powers under Article 142 of the Constitution. As to how an ineligible person explicitly prohibited by law could submit a resolution plan, he justifies that the Parliament does not have competence to enact a law to make a person, who was eligible on the date of commencement of CIRP, ineligible on the date of submission of resolution plan. By using the CIRP as a facade and in connivance with Mr. Golla, Mr. Mahendra Wig successfully (a) thwarted actions, liabilities and obligations under the SARFAESI and proceeding before the DRT, released the personal guarantors, and the secured properties, (b) made himself eligible to submit a resolution plan by misrepresentation, (c) passed on an OTS as resolution plan, and (d) used the resolution plan to wipe off claims of various creditors, including 66% of claim of BoB. He could not have done any of these if Mr. Golla as an RP played by the rule book and did not “explore every possibility to address the issue (illegality)”. He made several misleading and false statements before the DC to justify what he did. Behind the nefarious design of the CD and Mr. Mahendra Wig in this matter, there is one Mr. Golla. By his conduct and action, Mr. Golla has caused irreparable damage to the reputation of the institution of insolvency profession and rendered himself a person not fit and proper to continue as an IP. By his conduct and action, Mr. Golla has contravened the provisions of – (a) sections 17, 23, 25(2)(h), 29A, 30(2)(e), 30(4) and 208(2)(a) and (d) of the Insolvency and Bankruptcy Code, 2016; (b) Regulations 18 to 26, 36A, 37, and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016; and (c) Regulations 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations 2016 read with clauses 1, 2, 3, 5, 10, 12, 13, 14, 15, and 16 of the Code of Conduct for insolvency professionals specified in the First Schedule to the said Regulations. Order - Considering the above deliberate, blatant, orchestrated and collusive contraventions, the Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby cancels the registration of Mr. Martin S. K. Golla as insolvency professional, having Registration Number IBBI/IPA-002/IP-N00095/2017-2018/10238 and debars him from seeking fresh registration as an insolvency professional or providing any service under the Insolvency and Bankruptcy Code, 2016 for ten years from the date of this order.
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2018 (11) TMI 890
Corporate insolvency process - misconduct by Resolution Professional(RP) - appointment of Interim Resolution Professional (IRP) / Resolution Professional (RP) - IRP/RP conducted only one meeting of the CoC during the entire CIRP, particularly when many decisions are required to be taken with the approval of the CoC, including decision to approve a resolution plan or to liquidate the corporate debtor. - appointment as RP required approval of the CoC by 75% of voting share, while Mr. Gupta received only 73.42% of voting share of the CoC before the closure of e-voting window, thus he could not have been appointed as RP Held that:- An IP has the responsibility to run the corporate debtor as a going concern and conduct the entire CIRP. He has responsibility to run the process and assist the CoC in making business decisions such as resolution and liquidation. It is the CoC only which can decide if and how insolvency of a corporate debtor is to be resolved or it must be liquidated. It is not the job of an IP to take a decision, directly or indirectly, or by omission or commission, for or on behalf of the CoC or substitute itself for CoC. In the instant case, Mr. Gupta deprived the CoC of its right to decide the fate of the corporate debtor and thereby pushed the corporate debtor into liquidation. Probably, Mr. Gupta does not know the full implications of what he did. It is difficult to appreciate the contention of Mr. Gupta that no law required him to have a certain number of meetings of the CoC and, therefore, he did not violate any law. It cannot be appreciated in the context of either the basic premise of the Code which provides a market mechanism for resolution of insolvency nor the role envisaged in the Code for an enlightened and empowered IP having the responsibility to run the corporate debtor as a going concern and conduct the entire CIRP. Mr. Gupta did not have a single meeting of the CoC in his term as the RP. How does one justify that the CoC has no role whatsoever in a CIRP? The Code envisages definite roles for different constituents. It is unimaginable that a constituent does not play its role or is not allowed to play its role or encroaches upon another’s role. By not allowing and facilitating the CoC to play its rightful role, Mr. Gupta has dealt a fatal blow to the basic premise of the Code. He also failed to protect the interests of the corporate debtor and creditors and stepped into the shoes of the CoC. Therefore, Mr. Gupta has contravened provisions of sections 31(2) and 208(2)(a) of the Code read with regulation 7(2)(a) and 7(2)(g) of the IP regulations and clauses 9, 10, 12, 14, 15 of the Code of Conduct. Order: - (i) imposes on Mr. Gupta a monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRP of Stewarts & Lloyds of India Ltd. and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the Insolvency and Bankruptcy Board of India within 30 days of the issue of this order. The Board in turn shall deposit the penalty amount in the Consolidated Fund of India; and (ii) directs Mr. Gupta to undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency to improve his understanding of the Code and the regulations made thereunder, before accepting any assignment under the Insolvency and Bankruptcy Code, 2016.
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Service Tax
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2018 (11) TMI 850
Pandal or Shamiana and Goods Transport Agency Services - scope of religious ceremony - whether the said ceremony called Gur-ta-Gaddi Tercentenary Celebration held at Nanded, Maharashtra was a religious ceremony or not? - Held that:- From the opening sentence of certificate dated 23.10.2008 issued by District Collector, Nanded that the said ceremony called Gur-ta-Gaddi Tercentenary Celebration was an event of great religious significance - CBEC Circular dated 17.09.2004 was still applicable - the impugned order is not sustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 849
Principles of natural justice - opportunity of cross-examine not provided - Manpower Requirement Agency’ services - Held that:- Appellant has been all along perusing its case from the day it receipt Order-in-Original after making an application before the authority to provide him a copy, upon receipt of telephonic communication concerning Service Tax demand with interest and penalties. Thus, it is sufficient proof to establish that appellant is interested to defend his stand soon after it had gone to its knowledge and it has been moving through the appellant forums seeking natural justice by way of providing opportunity of being heard - the appellant’s stand that it had no knowledge about such issue of show-cause notice and passing of Order-in-Original is not without any basis. Commissioner (Appeals) could have provided him an opportunity of being heard to ensure the natural justice and it is well within his jurisdiction to do so, since Section 35(A)(3) empowers the Commissioner (Appeals) to make such further enquiry as may be necessary to pass such order as he things just and proper. Appeal allowed by way of remand.
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2018 (11) TMI 848
Cash Refund of accumulated CENVAT Credit - export of services - performance based service - palace of supply of services - it was alleged that services provided by the appellant to their overseas service recipient was in the nature performance based service in India, hence not an export service - Rule 5 of the CCR 2004 - Held that:- This Tribunal has already taken a view that the aforesaid services rendered by the appellant are in the nature of export of service and hence eligible to cash refund of accumulated CENVAT Credit. In the case of Advinus Therapeutics Ltd. [2016 (12) TMI 34 - CESTAT MUMBAI], this Tribunal more or less in similar circumstances, considering all aspects of the issue, interpreting Rule 3, 4 of Place of Provision of Services Rules, 2012, and Rule 6A of Service Tax rules, 1994, applying the principles of law laid down in this regard and the Board's clarification held that scientific or technical consultancy service provided in the development of drugs, to the overseas recipient of such service, is an 'export service'. The appellants are eligible to cash refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, except in relation to input service denied by the learned Commissioner (Appeals) observing that there is no nexus between the input and output service, as the necessary evidences in relation to Building maintenance charges were not produced and the rent-a-cab service has been mentioned in the exclusion clause of input service after amendment to Rule to 2(1) of the Cenvat Credit Rules, 2004 with effect from 01.04.2011 - matters are remanded to the adjudicating authority to calculate the admissibility refund amount except the credit availed on Building maintenance charges and rent-a-cab service - appeal allowed by way of remand.
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2018 (11) TMI 847
Business Auxiliary Service - the proceedings were initiated on the misconception that the tax liability, to be discharged on receipt, had not been - Held that:- This was one aspect of the dispute in which attempted reconciliation was reported as having failed. We are unable to comprehend any difficulty in doing so. It should be easy enough to ascertain the claim of discharge of tax liability on accrual basis from the financial records. All that was required to be produced were the invoices pertaining to the payments received from these clients in 2005-06 and the corresponding challans for deposit in the relevant year coupled with the accounting entries of transfer of those very amounts to the ‘bad debt’ ledger. The second unresolved aspect of the dispute is manifested in the demand of ₹ 2,66,604 allegedly short-paid as revealed from the remittance of service tax of ₹ 15,76,659 as ascertained from the returns for the period from 2002-03 to 2004-05 and the alleged liability of ₹ 18,43,263 ascertained by tax authorities from the ‘trial balance.’ Neither in the show cause notice nor in the proceedings before the lower authorities do we find any reference to the entry, or entries, in ‘trial balance’ from which the higher amount had been derived. We are not certain if the said amount has been shown as such in the ‘trial balance’ or if it has been computed by the application of the relevant rate of tax on the consideration reported therein - from the correspondence referred to in the orders of the lower authorities, it would appear that the show cause notice is sketchy on the nature of the allegation against the appellant. It should have been within the scope of the lower authorities, in the course of the reported correspondence, to throw light on the source of the computed figure on the basis of which the alleged deficit was formalised in show cause notice. It is but fair to expect the appellant to respond only thereafter. Alleged and unreported rendering of ‘business auxiliary service’ taxable under section 65(105) (zzb) of Finance Act, 1994 on the consideration received from the various newspaper establishments in which, as ‘accredited agency’ of Indian Newspaper Society - Held that:- From a perusal, it would appear that it is newspaper establishment that pays the appellant for acting as its agent. If that be the indicator of recompense for provision of service, it would appear that the appellant is not the provider of the service to the other agencies which is contrary to the surmise, and conclusion, in the findings of the two lower authorities. From this factual matrix alone, we can deduce that the lower authorities have, in their findings, misdirected themselves, in the determination to fasten tax on the consideration without compliance of the pre-requisite to fit the activity within the framework of one of the taxable services. We see no reason to perpetuate this in the absence of some worthwhile reason to believe that a consummation that would stand the test of appeal exists. We set aside the demands and the attendant detriments but remand the matter back to the original authority for a second time to enable the ascertainment of validity of the contention of the appellant on the discharge of tax liability. - Appeal allowed by way of remand.
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2018 (11) TMI 846
CENVAT Credit of service tax paid - outstanding dues - restriction under Rule 4(7) - Department observed that the Appellant is not making full payment of the value of the input services received by them from their contractor, and retaining the part payment of service provider on account of performance guarantee - Rule 4 (7) of Cenvat Credit - Held that:- Rule 4 (7) of CCR stands amended w.e.f. 1st April, 2011 and after the said amendment taking of Cenvat Credit is not linked with the payment of invoice to the service provider but it is linked with the invoice/bill/challan of input service. Though the grievance of the Department seems that irrespective, the payment was still to be made within 3 months, but we observe that since the respondent had paid the entire Service Tax on which they were liable for taking the credit i.e. on the amount as mentioned in the Bill/invoice, they were entitled to avail credit. The circular No.122/03/2010- ST dated 30th April, 2010 further clarifies the situation that the Service Tax paid is allowed as credit. Credit allowed - appeal dismissed - decided against Revenue.
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2018 (11) TMI 845
Cargo Handling Services - transport of materials from the plant to the yard of the appellants and thereafter the appellants do the said processes and reload the material into trailers and trucks for despatch to the customers - services associated with the production and manufacture of products by their clients M/s RINL - Business Auxiliary service. Service tax on straightening and cutting of TMT bars - Held that:- Department themselves were of the view that these activities amount to manufacture and had agitated the matter before the Tribunal and Supreme Court. It has been finally settled by Hon’ble Supreme Court that the process of cutting and bending is not a process of manufacture and no Excise Duty is payable on these activities. Therefore, the services rendered by the appellant by processing the goods manufactured by RINL are exigible to service tax - payment of service tax and interest within the normal period is liable to be confirmed - demand for the extended period is liable to be set aside. Service tax on Cargo Handling Service - Held that:- The cargo handling undertaken by appellant in the form of loading and unloading are a separate service for which separate amount was paid by their client and the transportation service rendered by the appellant was a separate service for which a separate amount was paid by their client. Thus, the cargo handling services are chargeable to service tax at the hands of the appellant - However, for the purpose of computation of cargo handling service, the amounts which were paid to them for transportation have also been included in the impugned order. These amounts need to be deducted as the transportation is an independent service and does not form part of the cargo handling service rendered by them. Appeal disposed off.
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2018 (11) TMI 844
Import of services or not - reverse charge mechanism - place of provision of services - Banking and Financial Services - commission paid in Brussels by the appellant whose Registered Office is in Hyderabad when the capital was raised by the company in London for use in Mauritius - Held that:- The appellant being a company registered in India, is covered under the scope of Section 66A of Finance Act, 1994. However, the taxable services which are provided from outside India must be received in India for taxation to be applicable under Rule 3. In this case, there is no dispute that the loan was raised outside India and used outside India although the parent company is located in India. Simply because the appellant company is located within India and the transactions which they made globally will also figure in their books of accounts, it would not mean that the services have been received in India. In this case the services were received in Mauritius and rendered in London. Therefore, they clearly do not get covered by Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 even if these transactions are reflected in the books of accounts of the head office in Hyderabad - Any transaction of a company in any of its places of business and commerce will get reflected directly or indirectly in the books of account of the Corporate Office and will effect their overall business result. This does not mean all these transactions are taking place or such services are being received in the location of the Corporate Office. Therefore, no service tax is leviable on the services in question. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 843
Classification of services - Consulting Engineering Services or otherwise - assessee had entered into agreement with different foreign companies having no office in India - reverse charge mechanism - The Hon’ble Bombay High Court and subsequently Hon’ble Supreme Court in the case of Indian National Shipowners Association vs. UOI [2009 (12) TMI 850 - SUPREME COURT OF INDIA] have categorically held that service tax is liable to be paid on services received from abroad only after the date of enactment of Section 66A - These views have also been circulated by CBEC vide their Circular dated 26.09.2011 - the liability for payment of service tax on services received from abroad will arise only from 18.04.2006 - demand for the prior period set aside. There is no justification for imposition of any penalty under the Finance Act, 1994. Appeal disposed off.
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2018 (11) TMI 842
Rectification of mistake - section 35C(2) of Central Excise Act, 1944 - Held that:- The decision of the Government of India supra is neither binding on us nor should be so construed as to deny the present application which seeks a limited relief within the scope of section 35C(2) of Central Excise Act, 1944. That opinion was also not available to persuade the Tribunal in composing the final order, now sought to be rectified, that was rendered. Doubtlessy, numerosity adaptation effect should not influence judicial decisions but it would do well for the applicant Commissioner not to be oblivious of the congruity of cognition on 'duty free' supplies and to forbear from projecting any dissonance with the decision of the Tribunal as lapsus calami. There are no mistakes apparent in the record, as well as in the decision of the Tribunal, to warrant rectification - application dismissed.
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2018 (11) TMI 841
CENVAT Credit - common input services against trading of goods on high sea without bifurcation of inputs on common input services for dutiable and exempted goods - Rule 6(3)(i) of CCR - Held that:- It is apparently clear that a pure sale, unassociated with delivery of goods and services together, is not to be considered as service. Therefore what is contained in Section 66D of the Finance Act, 1994 dealing with negative list of services concerning trading of goods and the clarificatory circular referred above as well as inclusion of the same in the explanation appended to clause 2(e) of the Cenvat Credit Rules 2004 are mere clarificatory in nature since definition of service as contained in 65B(44) and exempted service in 66D are to be read conjointly and not in exclusion of each other. This being the statutory definition sale of goods, be it made in the high sea or within territorial boundary of India in which Finance Act, 1994 has its force, cannot be called a service to impose tax liability or deny the credit under Rule 6 of Cenvat Credit Rules. The language imported in Rule 6(3AA) is therefore very clear and unambiguous that at the time of adjudication such option can be permitted to the assessee to be exercised in respect of the duty liability and interest to be calculated per annum from the due date for payment of amount for each of those months. Further, Rule 6(3AB) provides that the assessee has the option to pay an amount under clause (iii) of sub-rule (3) in the financial year 2015-16 and the provisions shall be deemed to be in existence till 30.06.2016 which indicates its retrospectivity. The order passed by the Commissioner (Appeals) confirming the duty demand along with interest and penalty is set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 840
Refund claim - scope of taxable territory - place of provision of service - the services as rendered by the appellant to JAL has actually been rendered in the state of J&K - whether project to which the impugned services have been given by the appellant since lies in the State of J&K, the services provided are to be considered as being provided outside the taxable territory of India or within the taxable territory, for the Head Office of recipient being in taxable territory? Held that:- Place of Provision of a service shall be the location of recipient of service provided that in case the location of service recipient is not available in the ordinary course of business that the place of provision shall be the location of the provider of service. In the present case, service recipient is JAL Baglihar Hydro-electric Project which is in the State of J&K. According to this Rule the place of provision of service provided by the appellant is State of J&K. The Place of Provision of Service is J&K which, as discussed, is outside the taxable territory in accordance of Section 66B. The Department herein was not liable to charge the service tax qua the said provision of service. Since it was deposited by the appellant without having this understanding, the appellant is very much liable to get refund thereof. The adjudicating authority below is, therefore, opined to have committed an error while rejecting this claim. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 839
Cargo Handling Services - activity of loading of coal from Railway siding into Railway wagons making use of Pay Loader - transport of coal from the pit head to various other points within mines - time limitation - penalty. Activity of loading of coal from Railway siding into Railway wagons making use of Pay Loader - Held that:- The activity has been held to be liable for payment of Service Tax under ‘Cargo Handling Services’ in the case of Gajanad Agrawal v. Commissioner [2008 (6) TMI 163 - CESTAT KOLKATA], where it was held that agreement of the parties that time was essence of the contract, nature of activity that was carried by the Appellants squarely falls under the definition of cargo handling service. Any activity incidental to freight of cargo is liable to be taxed under “cargo handling service” - the levy of service Tax on merit is upheld but levy restricted to normal period - penalty also set aside. Activity of movement of coal within the mine from pit head to other areas - Held that:- This activity has been considered in the appellant’s own case for a different mine in the decision [2017 (9) TMI 1329 - CESTAT KOLKATA]. For such movement of coal within the mine, the Tribunal has taken the view that the activity cannot be levied to Service Tax under the “Category of Cargo Handling Services” - demand cannot be upheld. Appeal allowed in part.
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2018 (11) TMI 838
Rectification of typographical error - Held that:- There is a typographical error in the first sentence. The figures mentioned in the first sentence is “Rs.61,81,771/-” which is incorrect as has table mentioned further down in the said paragraph reads the amount as “Rs.61,81,771/-”. The typographical error is rectified - ROM application allowed.
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2018 (11) TMI 837
Business auxiliary service - amounts collected as toll fee and paid to National Highways Authority of India (NHAI) - Held that:- Identical issue decided in the case of IDEAL ROAD BUILDERS PVT LTD VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [2015 (8) TMI 592 - CESTAT MUMBAI], where it was held that collection of tolls by the appellant is not considered as Business Auxiliary Service provided to NHAI as appellant is not rendering any service which is incidental or auxiliary on behalf of NHAI - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 836
Rectification of mistake - It is the case of Revenue that the appeal numbers mentioned in the final order should be "ST/257/2007 and ST/258/2007" instead of ST/447 & 448/2007 - Held that:- There is no error in mentioning the appeal numbers in the final order dated 21.06.2017 of the Tribunal. Yet, another error brought to the notice of the Bench is that in the Final Order No. A/30852-30853/2017, dated 21.06.2017 of the Tribunal, it did not mention the Order-in-Original No. 12/2007(ST), dated 24.08.2007 passed by CCE, Trichy. We do find that this is a typographical error and accordingly, the above said Order-in-Original is to be included on the first page of the Final Order dated 21.06.2007 - necessary rectification made. ROM Application allowed in part.
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2018 (11) TMI 835
CENVAT Credit - input services while constructing an IT park - Held that:- Appellant is rendering taxable output service in the form of renting of immovable property services and the facility was created by utilizing various services rendered by service providers and also various other services. Similar issue came up before the Tribunal in the case of Mundra Ports and Special Economic Zone Ltd Vs CCE & C [2015 (5) TMI 663 - GUJARAT HIGH COURT], where it was held that any input services used for erecting facility, service tax credit cannot be denied on such input services. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 834
SSI Exemption - use of brand name of others - earning commission for promotion by way of marketing and selling of branded goods under the brand name/trade name viz., BATA on behalf of their principals M/s Bata India Ltd. - case of appellant is that the said commission is less than threshold limit under the Notification No. 06/2005-ST and 33/2012 it is not taxable. Held that:- Services rendered by the appellant is to Bata India Limited and get paid for such services; appellant is not into rendering of any branded services to customers, who purchase only branded footwear from the outlet. In this situation, the argument of the Revenue that services rendered by the appellant being in the Bata showroom are taxable services provided by a person under a brand name or trade name it cannot be held so. Similar issue decided in the case of Commissioner of Central Excise, Chandigarh Vs. A.S. Financial [2014 (7) TMI 746 - CESTAT NEW DELHI], where it was held that respondent cannot be treated using the brand name of ICICI Bank Ltd. - Another case law, which is similar to the issue involved, is Bakliwal Brothers Vs. CCE, Raipur [2017 (9) TMI 84 - CESTAT NEW DELHI] wherein, the appellant was having a shop and activity of promoting sale of “Koutons” brand of readymade garments. The bench again held that such activity is not taxable, benefit of exemption for small scale service providers is available. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 833
Composite Works Contract - benefit of composition scheme - Works Contract (composition scheme for payment of Service Tax Rules) 2007 - whether the contracts entered by the appellant should be classified as construction of a pipeline primarily for non- commercial or non-industrial purposes or as turnkey/EPC projects including engineering or commissioning (EPC) projects? Held that:- The decision of the Larger Bench in the case of Lanco Infratech Ltd., [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] is identical to the dispute in hand, where it was held that construction of canals, laying of pipelines or conduits to export irrigation, water supply or for sewerage disposal when provided to Government or its undertakings for non-commercial non-industrial purposes, even when executed under turnkey projects /EPC contractual mode would fall within the ambit of clause (b), Explanation (ii)(b) of Section 65 (105) (zzzza) and would consequently not be exigible to service tax. The work done by the appellant in the nature of turnkey/EPC projects for Governments with respect to laying of pipes for water supply/sewerage is covered by explanation (ii)(b) of Section 65 (105) zzzza and is not exigible being not for commerce or industry. The demand of interest and penalties are liable to be set aside - the demand itself is not sustainable and the question of eligibility of the appellant for benefit of composition scheme becomes redundant - Appeal allowed - decided in favor of assessee.
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2018 (11) TMI 832
SEZ unit - refund claim - appellants could not produce all the documents necessary to substantiate their claims of refund. Held that:- It is not in dispute that the appellant has not able to fulfilled all the conditions for claiming the refund inasmuch as he has not provided the documentary evidence before the Original Authority as well as the First Appellate Authority to fully justify their refund claim and hence part of their refund claims were rejected - there is no merits in the grounds of appeal which seek to draw a distinction between the procedural requirements and substantial requirement of a notification. Considering the both sides of the arguments and that the appellant is an exporter claiming benefit of the exemption notifications (although they were careless in not producing the documents before the First Appellate Authority and Original Authority), this is a fit case to be remitted back to the Original Authority to examine the additional documents provided by the appellant and decide the refund claims on merit. Appeal allowed by way of remand.
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2018 (11) TMI 831
CENVAT Credit - common input services for trading goods - case of appellant is that the trading of goods has come into the exempted category only since 31.03.2011 and therefore the explanation adding ‘trading’ in the exempted service category cannot be made retrospectively applicable - also appellant has reversed back the amount of common input service credit availed by them. Held that:- For the period upto 01.04.2011, 100% CENVAT credit is available for certain services as per Rule 6(5) of the CENVAT Credit Rules, 2004. Trading was not included in ‘Exempted Service’ upto 31-03-2011 and prior to that the same was not considered as exempted services for the purpose of Rule 6(3) of the CENVAT Credit Rules, 2004. Therefore, there was no need to demarcate between taxable as well as exempted services for the purpose of availment of CENVAT Credit. The Appellant have already reversed ₹ 4,93,236/- as portion of Common CENVAT Credit attributable to both taxable as well as for trading activity in view of provision of Rule 6 of the CENVAT Credit Rules, 2004. The credit of the service tax paid on the services as enumerated under Rule 6(5) of the Cenvat Credit Rules, 2004 are to be allowed - Rule 6(5) starts of non-obstante clause ‘notwithstanding’, which would indicate that the provisions of Rule 6(3) are not applicable for the provisions of Rule 6(5) of Cenvat Credit Rules, 2004. Extended period of limitation - penalty - Held that:- The credit amount which has been reversed by the appellants has neither been accepted or examined by the department and the amount has been upheld without any verification. The demand for the extended period of limitation is set aside - penalty also set aside - for the limited purpose of verification and re-quantification of demand for the normal period, the matter is remanded to the Adjudicating Authority. Appeal allowed in part by way of remand.
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Central Excise
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2018 (11) TMI 830
Recovery of erroneous refund - it was alleged that appellants had not the manufactured the goods and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - the sole allegation against the appellant is based on the investigation conducted by Commissioner of Central Excise, Merrut, and as per the investigation, it is alleged that farmers from whom the inputs were purchased were non-existence. Held that:- The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellants were not manufacturer of the finished goods during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods. during the period of investigation itself, the appellants were allowed to continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers - the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants had not manufactured the goods during the impugned period. The appellant (M/s S.B Aromatics) was manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty on account of erroneous refund cannot be demanded on the allegation that the appellant was not a manufacturer - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 829
Imposition of penalty - suppression of alleged availment of inadmissible credit even after subsequent reversal upon audit noting before issue of show cause - Held that:- Admittedly, appellant’s availment of Cenvat credit which was held by the audit party is inadmissible is not being questioned in this appeal about its legality. In his Order-in-Appeal the commissioner has distinguished the appellant’s case in respect of earlier decisions concerning the appellant on similar issue passed by the adjudicating authority and he hold that previous audit cannot be taken as a plea of non-suppression. Section 11AC which deals with penalty on short levy or non levy of duty clearly indicates under 1(C) that such suppression of fact must have been done with intend to evade payment of duty and the intention of the appellant is found absent in the sense that its availment of allegedly inadmissible credit was previously subjected to scrutiny by the audit parties at least on three occasions as reveals from the audit report vide Exhibit (I), Exhibit (J) and Exhibit (K) of the period under dispute - appellant had not only reversed the credit which was held by the audit party as inadmissible but had also intimated the fact of such reversal by e-mail to the competent authority. Audit being one of the ways by which departmental authorities can bring the fact of inadmissibility of credit to the knowledge of the assessee on verification of its document for which no specific mode is prescribed in the statute for suo moto submission of Cenvat Credit documents or related information to Excise Department and self assessment mechanism being introduced, it cannot be said that any suppression of fact has been established against the appellant. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 828
Levy of Tractor cess on the parts and accessories of the Tractors - Notification dated 06.09.1985 - appellant submitted that on perusal of the notification regarding imposition of tractors cess, it is evident that cess is leviable on tractor and not on the parts, components and accessories thereof - Held that:- Part and accessories etc. of the tractor cannot be compared with that of the tractor itself. Therefore, the tractor cess is not leviable thereon in terms of Notification - Circular No. 41/88, dated 31.08.1988 issued by the Ministry of Finance, New Delhi regarding levy of cess on automobiles also goes in favor of appellant - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 827
CENVAT Credit - input service - GTA Service - outward transportation in the case of sale to the customer - place of removal - Held that:- Those services are included which are used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products “upto to the place of removal”. This definition became effective from 01.03.2008 - prior to the amendment the services used by the manufacturer for clearance of final products from the place of removal even to the customer’s place or anywhere else were excisable for cenvat credit. However, after the amendment the position has become absolutely changed, i.e. the benefit which was admissible beyond the place of removal so as to avail the cenvat credit stands redundant. It is only upto the place of removal that the service can be treated as input service whereupon the cenvat credit can be availed. The place of removal is the place from where the finally manufactured product is cleared after payment of excise duty. Thus any expense incurred beyond this point is not to be included in the value as such will not be the input thereby no cenvat credit will be available on any such expense - GTA service being the services beyond the place of removal therefore cannot be considered as the input services. Credit not allowed - appeal dismissed - decided against appellant.
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2018 (11) TMI 826
CENVAT Credit - capital goods - appellant availed 100% credit in first year - revenue neutrality - Held that:- When the situation is revenue-neutral, then no malafide intention could be discerned. In addition, undoubtedly, it is a case where extended period has been invoked by the Revenue and therefore, the burden of proving malafide/suppression is on the Revenue, since, it is the cardinal principle of law that the burden of proof lies on the shoulder of the person alleging it. Moreover, a mechanical reproduction of the language used in the statute would not per se justify the malafide intentions nor the invocation of extended period of limitation - Revenue has grossly erred in invoking extended period of limitation even after being satisfied that it was the case of revenue neutrality and for which reason alone, the impugned order is set aside. Even on merits, admittedly, the goods are covered under CTH 82, 84, 85 and 90 and just for this reason alone the Revenue has sought it to be classified as ‘capital goods’. The arguments of the Ld. Consultant that the above goods were never capitalized in the appellant’s books; that they were consumed during the process of the manufacturing activity of the appellant which only proves that they were not having any enduring benefits, etc., has nowhere been attempted to be dislodged - credit remains allowed. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 825
Clandestine removal - CTD Bars - fictitious trading challan - case of the department is based on the evidences recovered during the search of the premises of M/s Balaji Steels on 24.03.2005 - admissible piece of evidence - reliability on statement recorded - case of appellant is that the demand is based in assumptions and presumptions. Held that:- The diaries and other private documents recovered from the premises of broker are admissible pieces of evidence to establish the case of clandestine clearance against the noticee - in view of the said Section 36A, the department has prima facie discharged the burden of establishing the case of clandestine clearance against the appellants. It is also not the case of appellants, that the statements of recorded, were recorded under threat or duress and have been retracted by them immediately on the first available opportunity. In fact the statements made have never been retracted and on the repeated query from the bench, counsel for the appellant was not able to show any evidence to claim such retraction. Further from the adjudication order and the reply to show cause notice also it is evident that the appellants have never retracted their statements either in part or toto. In view of the evidences that have be produced and recovered during the course of investigation, along with the own admissions of the Director in the unit and the other conoticees, the Appellants contentions cannot be agreed with, that the charges made against them are based on presumptions and assumptions. On the contrary there is sufficient evidence to establish the charges against them - The reliance placed by the appellant on certain decisions of this tribunal in their appeal, cannot help their case because in the case of clandestine clearance the evidences recovered need to be examined in the fact of each case and it has to be shown that the ratio of the said judgment applicable to the facts/ evidences in the case under consideration - In absence of any such attempt on the part of the counsel to establish how those case are relevant for approving or disapproving the evidences in the present case mere citing of the decision will not advance the case of the appellants in matters of clandestine clearance which are fact and evidence based. There is no merit in the appeal and the appeal is dismissed - decided against appellant.
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2018 (11) TMI 824
Refund of unutilized CENVAT Credit - Rule 5 of the CENVAT Credit Rules, 2004 - Inclusion of value of the exempted goods cleared by them to SEZ in the total turnover of exported goods for the purpose of determination of the eligible amount of refund - Held that:- In the case in hand, there is no dispute that the goods were manufactured in a DTA and cleared to an SEZ unit, eligible CENVAT credit was availed and refund of accumulated CENVAT credit was sought which was sanctioned but subsequently, sought to be recovered from the appellant - the clearances affected by the appellant are only to SEZ unit and it has been settled by the various decisions of the Tribunal that clearances made to SEZ has to be considered as an export. Since the refund of the amount is only in respect of the CENVAT credit, and if the cash refund is not sanctioned, the CENVAT credit available to them is not being question, the same has to be given as a credit which the changed scenario consequent to GST brought into picture would not be possible. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 823
Reversal of CENVAT Credit with Interest - reversal at Tribunal stage - Held that:- Dealing with an identical situation, the Hon’ble High Court observed that reversal of Modvat Credit amounts to non-taking of credit and as such, the benefit of exemption notification cannot be denied on the ground that such reversal was done at the Tribunal stage - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 822
CENVAT Credit - input services - rent-a-cab services - period September 2009 to March 2010 - Held that:- The period involved being prior to 1.4.2011, when the definition of input service had a wide ambit as it included the words ‘activities relating to business’, appellants are eligible to avail CENVAT credit on rent-a-cab services - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 821
Refund of Excise duty paid during investigation - rejection of refund on the ground that the appellant has not debited the PLA with the amount of ₹ 25 lakhs an debited the same in April, 2017 only and thus, refund claim filed on 23.02.2017 is premature - Held that:- The first appellate authority has not considered the issue holistically, as it is on record and admitted, Order-in-Original No. 34/2009 dated 30.10.2009 confirmed demands raised by the appellant contained in the order portion, an appropriation of amount of ₹ 25 lakhs already paid by the appellant - If an amount of ₹ 25 lakhs stands appropriated on 30.10.2009, the case made out by the revenue that appellant had not debited amount in PLA and hence not eligible for refund is totally incorrect proposition. The adjudicating authority is directed to sanction refund of ₹ 25,00,000/- immediately - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 820
Clandestine manufacture and removal - it was alleged that the appellant have received formaldehyde as input from the supplier without payment of duty and the same has been used in manufacture of their final product plywood/ply board which has been cleared clandestinely - Held that:- The Revenue has failed to establish from where the appellant has received other inputs and no any stock taking to that effect has been done to ascertain the truth, merely ,on the basis of the statement of third party or the documents recovered from the possession of the third party the case has been made out against the appellant that they have received one of the inputs clandestinely and manufactured of the final product which has been cleared clandestinely - the charge of clandestine manufacture and removal of the goods is not sustainable, merely, on the basis of the receipt one of the raw material, on the basis of the statement of the third party - demand set aside. Cross-examination not granted - principles of natural justice - Held that:- On the weighment slip, the name has been written of the appellant in handwriting, but the Revenue has failed to establish that who has written the appellant’s name on weighment slip. In the absence of the said evidence the weighment slip relied by the Revenue is not admissible - the Revenue has relied upon the statement of one of the alleged manufacturer of said goods who stated that they have cleared goods clandestinely to the appellant without payment of duty but no examination in chief of the statement of supplier has been done by the adjudicating authority and no cross examination of the said witnesses has been granted to the appellant - the charge of clandestine removal is not sustainable. The Revenue has failed to prove the charge of clandestine manufacture goods by the appellant - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 819
SSI Exemption - use of brand name of others - case of Revenue is that since these diaries have logo of LIC printed on them, the exemption under notification No 8/2003-CE was not available in respect of these products - Held that:- The use of brand name should in the course of trade in the goods under consideration. If the same is not in the course of trade then benefit of the exemption contained in this notification cannot be denied - In the present case LIC Logo printed on diaries do not establish any connection between the goods and the logo, hence the same cannot be said to be in the course of trade. Further it cannot be said that LIC is in trade of selling the LIC diaries. Thus without establishing such connection between the goods and logo printed on the diaries benefit of exemption under Notification No 8/2003-CE cannot be denied - benefit of notification remain allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 818
Classification of goods - Non Vegetarian Burgers, McCurry pans, Non Vegetarian wraps etc, which are preparation of meat and served in the restaurant of appellants in butter paper, paperboard, tray, pouches, paperboard cones or any other paperboard boxes - whether the goods put up in unit container merit classification under tariff heading 1601.10 or under CTH 1601.90? Held that:- Only the mode of supply for consumption in restaurant is by wrapping them in butter paper, paperboard, tray, pouches, paperboard cones or any other paperboard boxes. How the mode of such service is different from serving the same on crockery or plates has not been answered by the Commissioner (Appeal). If the reasoning and logic of Commissioner (Appeal) is accepted then service of food in restaurant/ hotel for consumption therein will have to be treated as service in unit container. Do really we say “a plate of Chicken Tikka” or a half plate of “Chicken Tikka” served in restaurant is service of the same in unit container. The basic purpose of the phrase “put up in unit containers” is that for whole sale clearance from the manufactory the goods have been packed in unit container. We are unable to agree with the reasoning of Commissioner (Appeal) as mode and manner of service in a restaurant cannot determine the leviability to duty. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 817
CENVAT Credit - iron and steel raw materials and cement given to M/s. CECL for execution of civil contract relating to clinker silos project - Rule 15(1) of the CENVAT Credit Rules, 2004 - Held that:- The issue is squarely covered by various recent decisions in the case of M/s. Chettinadu Cement Corporation Ltd. Vs. C.C.E, L.T.U., Chennai [2016 (12) TMI 218 - CESTAT, CHENNAI], wherein the Tribunal has, after considering the rival contentions, remanded the matter to the adjudicating authority for de novo consideration. Matter remanded to the file of adjudicating authority for de novo consideration in the light of the direction in the case of M/s. Chettinadu Cement Corporation Ltd. - appeal allowed by way of remand.
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2018 (11) TMI 816
Valuation - captive consumption - clearances affected within the factory premises - applicability of Rule 8 of Central Excise Valuation Rules, 2000 - extended period of limitation - Held that:- Larger Bench of the Tribunal in the case of Ispat Industries Limited [2007 (2) TMI 5 - CESTAT, MUMBAI] has specifically ruled that the provisions of Rule 8 of the Valuation Rules will not apply in case where some part of a production is cleared to independent buyers - In the case in hand, it is seen that most of the goods which were manufactured by the appellant are cleared to independent buyers and the value of such clearances is higher than the value on which duty liability has been discharged by the appellant on the captively consumed goods. Rule 8 come into play when captively consumed goods are used for production or manufacture of other articles - In the case in hand, the factual matrix is that appellant has not consumed the goods for production or manufacture of other articles but has consumed the same for Civil construction from the expansion of the projects, hence the claim of applicability of the Rule 8 is ruled out. Extended period of limitation - Held that:- Since, there was litigation on the issue at various forums, the plea of Learned Counsel that there was no malafide in valuing the captively consumed goods based upon the cost of production formulae consumed goods needs to be accepted - the demands raised in these appeals by invoking the extended period of time are unsustainable and liable to be set aside. The demands raised and confirmed within the limitation period are upheld along with interest and penalties imposed for such an amount is also upheld - appeal allowed in part.
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2018 (11) TMI 815
Time limitation - whether the demand for the differential duty for the period September 2008 to March 2009 is hit by limitation or otherwise? - Held that:- The appellant had indicated in the returns for September 2008 onwards that he is seeking the change in the classification of final products of crude palm stearin from CETA 3823 1900 to 1515 9090. We also notice that by a letter dated 03.12.2008, Superintendent of Central Excise, Kakinada noted the change in classification sought in ER-1 return for September and October 2008 and directed the appellant to reclassify the product under 3823 1111 or 3823 11 12 or 3823 11 19 as the case may be and pay the differential duty. Invocation of the extended period is unsustainable as department was aware and have sought clarification and got the same on the change of classification that affected the duty liability, secondly there is no dispute as to the fact that appellants were indicating in monthly returns that clearances were under nil rate of duty by availing the benefit of notification. This would mean that there is no suppression of fact with intent to evade duty. The appeal needs to be allowed on the ground of limitation.
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2018 (11) TMI 814
100% EOU - CENVAT Credit - input services - product liability insurance - product recall liability insurance - place of removal - Department has denied the same on the ground that it is a post manufacturing activity and the liability arose only after goods were handed over to the buyers - Held that:- It can be seen that the risk covers the defects with the products. In such cases, when there are defects in the products, the appellant/manufacturer will have to recall the product and thereby incur huge financial loss. The insurance is for covering financial loss of the appellant/manufacturer and it cannot be considered as a post manufacturing activity. The finance or raising of capital or adjustment of finances by way of taking insurance etc., falls within the inclusive part of the definition. Tribunal in the case of New Foods Pvt Ltd Vs CCE ST, Bangalore-II [2017 (1) TMI 151 - CESTAT BANGALORE] considered an identical issue and held in favor of the assessee holding that Cenvat Credit is eligible and refund claim was sanctioned. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 813
CENVAT Credit - input services - Clearing & Forwarding domestic supply services - travel agents service - professional (management consultancy) service - Held that:- The category of service provided by McKinsey & Co. is management consultancy service. Though it is termed that professional fees is collected by the service provider, it is very much clear that these are services in relation to after-market acceleration, which indicates that these are services for market analysis. The said services fall within the inclusive part of the definition - the disallowance of credit on such services is not justified. The impugned order requires to be modified to the extent of allowing the credit in respect of professional (management consultancy) service availed for market analysis service - appeal allowed in part.
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2018 (11) TMI 812
Short payment of duty on the ground that assessee claimed discounts - Wilful misdeclaration and suppression of facts - demand raised invoking proviso to Sec.11A along with interest and penalty - Held that:- All discounts were allowed including those which were not declared in their price declaration but which were passed on to the customers. The only discounts which were not allowed are those which the appellant has not passed on to the customers but has claimed in their invoices - there is no reason to interfere with such an extremely fair and balanced order. As assessee claimed the discounts and has not passed on the same to their customers, we find that proviso to Sec.11A has been rightly invoked and the penalty under Sec.11AC and interest under Sec.11AB have also been correctly imposed - As far as the penalty under Rule 173Q is concerned, where a penalty under Sec.11AC is imposed, the penalty under Rule 173Q cannot be imposed. Appeal allowed in part.
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2018 (11) TMI 811
Activity amounting to manufacture - packing, repacking, filtering, cleaning, heating etc. of lubricating oils after which they were sold under the own brand name of the appellant assessee - Held that:- Evidently, if these activities already amounted to manufacture there would have been no need to introduce the aforesaid chapter note creating a legal fiction that labelling, relabeling and repacking and adopting any other treatment to render the product to the consumer as manufacture. This chapter note was subsequently renumbered as chapter note 4. The activity do not amount to manufacture - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 810
Valuation - physician samples not sold but given free to the doctors - comparable price under Rule 4 of the Central Excise Valuation Rules - time limitation - Held that:- In view of the position now settled that the physician samples should be valued at the same rate at which similar goods are sold in the market even if the packing size is different, there is no infirmity on merits in the impugned order. The demand is therefore sustainable on merits. Time limitation - Held that:- It is evident from the two circulars issued by the Board, that there was sufficient confusion and even the Board was of the opinion initially that the valuation has to be done on cost construction basis. In such scenario, the assessee cannot be faulted for following such a practice even if it is incorrect as per the subsequent directions of the Board and the judicial pronouncements. There was a reasonable cause for the appellant to mistakenly value the goods on cost construction basis instead on the basis of comparable price under Rule 4 - the extended period of limitation cannot be invoked in this case and the demand for the extended period does not survive. The demand for duty within the normal period along with interest is upheld - Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (11) TMI 809
Power to cancel the registration of C-Forms - Held that:- Issue notice. There shall be stay of the impugned order till the next date of hearing.
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2018 (11) TMI 808
Imposition of penalty u/s 10-A of the Central Sales Tax Act, 1956 - purchase of M-Seal against Form-C - Held that:- The penalty is imposable for deliberate defiance of law or upon guilty or contumacious or dishonest conduct. Also, the burden to establish such fact rests on the revenue. Further all types of omissions or commissions in the use of Form-C may not be embraced in the expression "false representation". Though assessee admits that it may not even be entitled to purchase the commodity MSeal against Form-C, at the same time, there is no material or finding recorded by the revenue authority to establish that it had made a false declaration, while issuing such Form-C. The revenue authority also did not dispute the fact that commodity of M-Seal is popularly sold at hardware stores - The reasoning of the Tribunal that the assessee should have always taken care while issuing Form-C and because such care was not taken, therefore, its conduct was not bonafide is too difficult to accept inasmuch as in the first place the test of care required to be taken care cannot be defined for the purpose of application in all cases involving wrong use of Form-C. Even if it is established that due care may not have been taken, it would not lead to an automatic or logical conclusion of false declaration or malafide intention. The test to be applied being one of false declaration, absence of care to some extent may not therefore, be relevant. Decided in favour of the assessee and against the revenue - petition allowed.
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2018 (11) TMI 807
Activity amounting to manufacture or not - lacquering of hardware and locks - U.P. Trade Tax Act, 1948 - Held that:- The correct and the only test is to be applied that laid down by the Supreme Court in the case of Sonebhadra Fuels Vs. Commissioner of Trade Tax, U.P. [2006 (8) TMI 304 - SUPREME COURT OF INDIA]. Applying that test, even according to the assessee's own case, it has been stated, by under going the process of lacquering, the goods namely hardware and locks became differently marketable and in fact, it was assessee's own case that different quality of lacquering imparted different price to the same goods. In any case, as a process of treating or finishing the goods, lacquering by very nature, as discussed by the Tribunal would be covered by the term finishing and treating or otherwise processing the goods - thus, the process is amounting to manufacture - decided against assessee and in favor of Revenue. Whether, the finding recorded by the Tribunal that the assessee had engaged in lacquering activity, on its own account, is based on any material and evidence? - Held that:- Though the assessing authority had made an observation to the effect that the one of the partner of the assessee's firm had admitted to have engaged in the activity of lacquering of goods, neither such statement has been extracted nor its substance considered by the Tribunal. On the other hand, before the Tribunal, the assessee appears to have taken categorical stand that he had not engaged in the activity of lacquering of goods and had denied existence of raw material, equipment and workmen to engage in such activity - The Tribunal had noted the case set up by the assessee but did not deal with it while recording its finding. A specific finding on this issue was necessary to be recorded to determine whether the assessee was the manufacturer of the goods - the order of the Tribunal to the extent it holds that the assessee was engaged in activity of manufacturing/lacquering is set aside and the matter is remitted to the Tribunal to pass a fresh order strictly on the basis of evidence led before it. Revision disposed off.
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2018 (11) TMI 806
Validity of Assessment Order - time limitation - petitioner has challenged the assessment orders inter alia on the ground that there is a huge delay in the service of the copies of the orders upon the petitioner which give rise to a legitimate presumption that the orders were not actually passed on the dates mentioned in the orders rather on a much later date beyond the time prescribed - Held that:- The dates of the assessment orders and the date of their service upon the petitioner are clear enough and it is only on account of the long gap between passing of the orders and their services that a legitimate presumption is arising that the orders may not be the orders passed on the purported date but on the subsequent date. This presumption arises on the admitted facts without going into any factual controversy. Under the facts and circumstances of the case as there is inordinate delay in the service of the orders which goes completely unexplained coupled with the fact that the officer passing the orders made no efforts to serve them and the orders could be served only after he was transferred necessitates exercise of discretionary jurisdiction. The assessment orders impugned in each of the writ petitions are of subsequent date rather than of date on which they are purported to have been passed and as such are barred by limitation - petition allowed.
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Indian Laws
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2018 (11) TMI 851
Anti-competitive practice of mandating a No-Objection Certificate prior to the appointment of stockists in the State of Gujarat - monetary penalties imposed on the erring associations and pharmaceutical companies - Held that:- Monetary penalties have been levied upon them at the rate of 10% (in case of office bearers of the erring associations) and 1% (in case of officials of the erring pharmaceutical companies) of their respective average incomes, based on the income tax returns (ITRs) for the three previous years as filed by them - In terms of Section 27 read with Section 48 of the Act, the Commission deems it appropriate to calculate penalties on the four individuals named supra, at the rate of 1% of their respective incomes based on their income tax returns (ITRs) for three years. The Commission is of the view that benefit of these mitigating factors also need to be extended qua its officials, namely Shri Srinivasa Reddy and Shri Bharat Pandya, and accordingly, they also deserve a remission in their respective penalties by 40%. Application disposed off.
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