Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 29, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
GST - States
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101/GST-2 - dated
22-11-2018
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Haryana SGST
Corrigendum in Haryana Government, Excise and Taxation Department, Notification No. 99/GST-2, dated 06.11.2018.
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ERTS(T) 65/2017/Pt. II/59-61/2018-State Tax - dated
5-11-2018
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Meghalaya SGST
Seeks to exempt supply from PSU to PSU from applicability of provisions relating to TDS.
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ERTS(T) 65/2017/Pt. II/58-60/2018-State Tax - dated
30-10-2018
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Meghalaya SGST
The Meghalaya Goods and Services Tax (Thirteenth Amendment) Rules, 2018.
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G.O. Ms. No. 148 - dated
5-11-2018
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Tamil Nadu SGST
Amendments in the Notification No.II(2)/CTR/823(a-1)/2018, dated 13th September, 2018.
SEZ
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S.O. 5841(E) - dated
13-11-2018
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SEZ
Central Government de-notifies an area of 5.03 hectares, thereby making resultant area as 5.09 hectares at Focal Point Industrial area, Phase VIII-Extension, District Mohali, in the State of Punjab
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S.O. 5839(E) - dated
12-11-2018
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SEZ
Central Government de-notifies an area of 1.86 hectares at Khandwa Road, Bhanwarkuan, Indore in the State of Madhya Pradesh, thereby making resultant area as 6.13 hectares
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of GST - premimum for leasing out of the plot allotted to the petitioner for the purposes of hospital, nursing home, diagnostic centeres etc. - Demand raised despite the fact that advance rulings was in favor of assessee - notices issues.
Income Tax
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Allowance of interest expenditure u/s 37 - interest paid to the depositors - there was no business in finance carried on by the Firms and the partners had merely taken advances from the firm, the application of which was not the concern of the firm - Interest expenditure not allowed.
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When there is no significant or noticeable decline in the G.P. in comparison to the earlier year whereas there is a significant increase of six times in the turnover. The said insignificant decline in the G.P. cannot be a reason for an addition.
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Eligible for deduction u/s 80P - AO directed to allow pro rata expenses in respect of interest earned from deposit held with nationalized bank to the assessee for computing the deduction u/s. 80P
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Disallowance of provision for wages - allowable deduction u/s 36 - the assessee is eligible for claim of PACS Manager Fund payment as expenditure.
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Levy of penalty u/s.271D - assessee has not been able to substantiate its claim for receiving amounts in cash - A deposit need not be interest bearing. So also a loan - levy of penalty confirmed.
Customs
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Name of the petitioner agency placed in its electronic system under "Alert" - the department seeks recovery of amount coercively by blocking the petitioner's future clearances. Obviously, there cannot be recovery coercively made even before the demand is confirmed.
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DFIA Scheme - mentioning the technical characteristics, quality and specifications of the perfumes/essential oils/ aromatic chemicals used by it in its shipping bills. - The consequence of the assessee’s interpretation would render it impossible to correlate the duty-free imports made under the DFIA, with the inputs used in the exported products.
Corporate Law
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Territorial jurisdiction - Merely, because the dispute is about those shares which are issued by Indian Company would not lead to the conclusion that cause of action has arisen in India - court in Dubai would be more convenient forum to decide the dispute between the parties.
State GST
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Guidelines for Deductions and Deposits of TDS by the DDO under Meghalaya Goods and Services Tax (MGST) Act, 2017.
IBC
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Initiation of Corporate Insolvency Resolution Process - booking of three flats - buy-back agreement cum guarantee deed - Adjudicating Authority is only to ascertain the existence of a default and not the exact amount due.
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Initiation of Corporate Insolvency Resolution Process - sale of flats with assured return plan - developer failed to refund the assured - Financial Debt - Though considerable long period has since lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor - Application admitted.
Service Tax
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Classification of services - the appellant has to represent the Timken (USA) to their various customers - The services availed by the appellant are more akin to franchise services rather than intellectual property right service
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Valuation - inclusion of transaction charges collected by the appellant from their clients for providing stock broking services - since this liability have been passed on by him on their clients, the same need to be included in the taxable value as per the provision of Section 67 of the Finance Act, 1994
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Valuation - inclusion of terminal charges shown as the miscellaneous income - demanding a service tax on the notional value taken by the appellant only for the purpose of accounting of the cost of the different units working under the appellants, will be not in the interest of the service tax law.
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Valuation - The electricity charges reimbursed to the service provider by the service recipient not includible in gross value of renting of immovable property service.
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Voluntary Compliance Entitlement Scheme - correction sought in the erroneous declaration made in VCES-1 form to reduce the tax liability - it would be a purely procedural aspect - benefit of VCES allowed.
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Refund of service tax paid on brokerage charges collected from the Foreign Institutional Investors - Unjust enrichment - since the services rendered by the Respondent to the Foreign Institutional Investors were in the nature of export of services, refund allowed.
Central Excise
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Levy of Tea Cess - export of tea under bond under Rule 19 - whether the appellants on export of tea are required to discharge Tea Cess which is otherwise leviable under Section 25 of the Tea Act, 1953? - Held no
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CENVAT Credit - Input services - The activities undertaken by such Commission Agent/broker would definitely fall under the ‘services of sale’ - credit allowed.
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CENVAT Credit - denial on the ground that the duty involved is not indicated in the relevant invoices, also on the ground that the name of the appellant itself does not figure in the invoice - credit not allowed.
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Classification of goods - Naptha - whether Naphtha can be classified as a ‘motor spirit’? - Held No
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Irregular availment of CENVAT Credit - 100% CENVAT credit on capital goods availed in the first year instead of 50% - they had sufficient balance in their CENVAT credit account and therefore, they have not utilized the said CENVAT credit and it was merely a book entry - Demand of Interest and penalty not sustainable.
VAT
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Mining Services - C-Forms - concession for the HSD - whether “quarrying” can act as “mining”? - benefits under Section 8 of the CST Act - whether the fuel it uses for its machinery and vehicles qualifies for that benefit? - Revenue directed to allow download of the necessary C-forms
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Rejection of the claim of inter-state purchases on commission basis - issuance of Form-H - Though it is true that a claim of the export sale cannot co-exist with the claim of interstate purchase of wheat on commission basis, both claims arising in the hands of the same assessee, however, it is to be seen whether the nature of transaction performed by the parties would get altered or determined solely upon issuance of Form- H
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Exemption form sales tax - sales effected from the Customs Bonded Warehouses - sales in the course of import or not - The documents having evidenced the sale before the import was completed and the transfer of title to the goods; there cannot be any tax levied on the transaction as one carried out in the State.
Case Laws:
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GST
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2018 (11) TMI 1412
Levy of GST - premimum for leasing out of the plot allotted to the petitioner for the purposes of hospital, nursing home, diagnostic centeres etc. - The Authority for Advance Ruling, U.P. vide order dated 6.6.2018 ruled that GST is not applicable and the upfront amount on the lease as mentioned at serial no.41 of the notification no. 12 of 2017 as amended by notification no. 32 of 2017 is exempt. Held that:- Even though the aforesaid Advance Ruling is final and conclusive, respondent no. 3 has issued notice dated 24.8.2018 for payment of GST on the premimum for leasing out of the plot allotted to the petitioner for the purposes of hospital, nursing home, diagnostic centeres etc. Sri Aditya Bhushan Singhal, learned counsel appearing for respondent no. 3 Sri C.B. Tripathi, Special counsel appearing for respondent 3 as well as learned counsel for Union of India and the learned Standing counsel for the State of U.P., all are directed to file counter affidavit within a month. Two weeks thereafter are allowed to the petitioner to file rejoinder affidavit.
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Income Tax
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2018 (11) TMI 1435
Stay petitions - Deduction u/s 37(1) with regard to the services actually rendered by motorcar dealers to the assessee company - Held that:- It is not disputed by the assessee that they had complied with the condition but only upto May 2018. It is not clear as to why the assessee abruptly failed to comply with the conditional order passed by the Tribunal. The explanation offered by the assessee is that the Tribunal commenced hearing of the appeals. This cannot be an answer since as long as the interim order continues to remain intact, the assessee is bound by it and has to comply with the order in its letter and spirit till the disposal of the main appeal by the Tribunal. Therefore, we do not appreciate the conduct of the assessee in abruptly failing to comply with the conditional stay order dated 12.01.2018 and filing fresh set of stay petitions, which are not maintainable and therefore that is one more reason to reject the stay petitions apart from the reasons assigned by the Tribunal. It is well open to the assessee to seek for other prayers before the Tribunal, if so advised. It is submitted by the learned Senior Counsel for the assessee that the application filed for modification of the order dated 12.01.2018 is pending. We refrain from making any observation at this juncture and it is well open to the assessee to pursue their claims before the Tribunal. W.P. dismissed.
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2018 (11) TMI 1434
Allowance of interest expenditure u/s 37 - interest paid to the depositors - Held that:- The assessee also debited its capital account and corresponding credit was given to the account of the college. It then availed of an overdraft facility of ₹ 5.5 lakhs from an account maintained for business purposes and disbursed it to the college. The balance was treated as a loan availed by the assessee from the College. The assessee paid interest to the bank on the overdraft and to the college for the loan, which were claimed as business expenditure. The overdraft facility was held to be not availed for business purposes and the so called loan from the college was held to be the assessees' own funds. Here too there was no business in finance carried on by the Firms and the partners had merely taken advances from the firm, the application of which was not the concern of the firm. We, hence, find that the advances obtained by the partners were not in the nature of business carried on by the assessee and, hence, there could be no claim of business expenditure insofar as the interest paid to the depositors, the public. We, hence, answer the other questions of law framed against the assessee and in favour of the Revenue. We delete the order of the Tribunal insofar as the allowance of interest expenditure under Section 37. The order of the AO disallowing the expenditure on interest paid to the depositors is sustained on the grounds herein above mentioned as distinguished from the view taken by the AO. The appeals would stand partly allowed.
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2018 (11) TMI 1433
Addition on account of stock difference found during survey - Held that:- We find that the CIT (A) has analyzed the items wise details of stock difference worked out by the AO and submission made by the assessee. CIT (A) has called for a remand report from the AO. AO vide his remand report dated 18.01.2010 has verified the contentions of the assessee and same stands re-examined by the CIT (A) and found to be correct. CIT (A) has deleted the addition made by the AO based on remand report of the AO. Hence, Revenue should not have any grievance now as the decision of CIT (A) is based on verification carried out by the AO during the course of remand report proceedings. We have gone through the remand report as well as the order of CIT (A) and found that the CIT (A) has confirmed the items of stock around ₹ 25 lakhs, which were not reconciled by the assessee and deleted the addition of those items, which stood reconciled and stand verified by the AO. Addition on account of difference in cash not explained during survey - Held that:- We find that the assessee has explained that cash was found short as it was given to various parties as advance on the date of survey, which remained to be entered in to cashbook, and it was accounted for next day. We further are of the view that no addition can be made on account of shortage of cash. Therefore, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. This grounds of appeal is therefore, dismissed.
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2018 (11) TMI 1432
Addition being difference in contract receipts actual receipts v/s contract receipts as shown in the Form-16A (TDS certificate) - Held that:- We find that the total receipts are not taxable as only profit element is required to be taxed. Therefore considering the various decisions of Coordinate Benches we consider 10% net profit of the amount ofRs.10,58,063/- as profit earned by the assessee in respect of these gross receipts as per contract. The AO directed to work out the net profit accordingly and the balance addition is therefore deleted. This ground of appeal is partly allowed. Addition of contract receipts - There is a difference on account of opening balance in respect of ledger accents with the assessee and ledger accounts of Vaman Prestressing Co. Pvt. Ltd., hence the amount of ₹ 5,29,764/- has been rightly added by the AO and confirmed by the CIT(A). The contention of the AR that only net profit is to be taxed is without any basis as this difference is on account of actual receipts, hence, the said income remained to be taxed, accordingly this ground of appeal of the assessee is dismissed. Addition towards kitchen expenses - no pointing out any specific defects in the vouchers made by the AO - Held that:- No merit in confirmation of such addition, accordingly same is directed to be deleted, this ground of appeal of assessee is therefore allowed. Addition made towards labour expense - Held that:- AO has made disallowance of 75,000/- pertaining to labour expenses out of total expenses of ₹ 57,05,271/-. However, we find that disallowance made without any specific defect pointing out by the AO, therefore such disallowance of ₹ 75,000/- are directed to be deleted. Addition made towards travelling expenses - Held that:- Disallowance of 20% considering the same as personal in nature, hence, the element of personal use of travelling does not denied. No infirmity in the order of CIT(A), accordingly the same is confirmed. Therefore, this ground of appeal is dismissed. Addition made towards vehicle expenses - Held that:- AO has made disallowance @10% considering the personal element in respect of use of vehicles therefore we do not find any infirmity in the order of CIT(A), accordingly the same is upheld. Therefore, this ground of appeal is dismissed.
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2018 (11) TMI 1431
Penalty u/s.271(1)(c) - additional sugarcane price paid over and above the purchase price fixed by the Government - appropriation of profit which is liable to be disallowed as business expenditure - Held that:- In absence of any contrary material, we do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in deleting levy of penalty by following the order of Tribunal in assessee’s own case for earlier assessment year. Accordingly, the impugned order is upheld and appeal of the Revenue for assessment year 2010-11 is dismissed. Also the manner in which penalty proceedings u/s.271(1)(c) have been initiated, are ambiguous. In assessment order dated 25.03.2013 while initiating penalty proceedings, the Assessing Officer has recorded satisfaction u/s.271(1)(c) without specifying charge for levy of penalty. However, while levying penalty, the Assessing Officer concluded that the assessee furnished inaccurate particulars of income, therefore, provisions of section 271(1)(c) are attracted. The manner in which satisfaction for initiating penalty u/s.271(1)(c) has been recorded suffers from ambiguity and vagueness. Therefore, penalty levied u/s.271(1) (c) of the Act is liable to be deleted on this account as well. - Decided in favour of assessee. Allowance of claim of expenditure pertaining to preceding assessment year - Held that:- CIT (Appeals) granted relief to the assessee by following the order of Tribunal in assessee’s own case in assessment year 2010-11 as followed the decision of Exxon Mobil Lubricants (P) Ltd. [2010 (9) TMI 36 - DELHI HIGH COURT]. DR has neither brought to our notice any contrary decision nor the ld. DR has pointed any difference between the nature of transaction in the assessment year under appeal and the assessment year 2010-11 for which the Tribunal has granted relief to the assessee. We do not find any error in the order of First Appellate Authority in allowing the appeal of assessee - Decided against revenue
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2018 (11) TMI 1430
Trading addition - GP estimation - CIT-A applying the g.p. rate of 1.67% as against g.p. rate of 0.93% declared by the assessee - Held that:- The average of G.P. declared by the assessee in the past years which is accepted or attend the finality will be a reasonable and proper basis for estimation of income. Hence, we find that the Assessing Officer was very reasonable and just in estimating the income on the basis of the average of the G.P. declared by the assessee for last three years. The ld. CIT(A) has restricted the addition by applying the G.P. for the immediate preceding year and the revenue has not challenged the same, therefore, we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. The explanation of the assessee for declining of G.P. due to the market condition can be considered only when it is supported by the books of account. Therefore, once the books of account are rejected then this contention of the assessee cannot be accepted. Disallowance of 10% of the expenditure for want of supporting evidence - Held that:- We find that the liability of the expenditure of which 10% was disallowed by the Assessing Officer pertains to audit fee, rent, salary expenses, freight and telephone expenses etc., therefore, the audit fee, rent, salary expenses are very much verifiable and can be compared with the earlier years being recurring in nature. These expenditures are also verifiable independently from the recipients. Hence, the expenditure for audit fee, rent, salary and telephone expenses which are verifiable from the record cannot be disallowed in the manner, the Assessing Officer has made an ad hoc disallowance. Hence, to the extent of the expenditure on these accounts being audit fee, rent, salary and telephone expenses is deleted. The rest of the expenditure for which 10% was disallowed for want of supporting evidence is consequently upheld. Accordingly we modify the orders of the authorities below qua this issue. The Assessing Officer is directed to rework the disallowance of 10% on remaining items of expenditure. - Decided partly in favour of assessee.
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2018 (11) TMI 1429
Addition being the difference between the income surrendered and the income shown in the return of income - Held that:- As noted in para number 4.3.4 where the assessee has stated that he had sold of all the machinery to scrap dealers and there were no machineries with him, however the department found Guthka making machinery being operated with generator sets and raw materials as well as finished goods in the appellant’s premises. In the statement dated 17/12/2000 , date the assessee admitted that he was not only having the such machinery but also surrendered ₹ 35 lakhs towards investment in the machinery and unaccounted income from the said activity for assessment year 2009-10 and ₹ 2 lakhs for assessment year 2008 – 09. This was also confirmed by submitting a letter dated 26/9/2008. Assessee also did not submit in the letter that why is he disclosing income and its application both. Further, the assessee has also disclosed major sums for miscellaneous income for which no break up was given. Assessee has never explained his disclosure before AO. For the reasons given by the learned commissioner Appeals in para number 4.3.5 also we are not inclined to interfere in the orders of the lower authorities and therefore the addition of ₹ 2 lakhs is confirmed. Accordingly, ground number one of the appeal of the assessee is dismissed. Disallowance with respect to loss of two proprietary concerns - Held that:- AO found that machineries of Guthka were running in business premises of assessee on generator, these two facts goes a long way to show that the business of the proprietary concern is not closed. Further in this year, business income is taxed as a part of disclosure, then where from these income is generated other than these two proprietary business of the assessee, is not shown. It is also unfair to tax the income as business income, and not to grant benefit of losses resulting out of expenses of that income. In view of this, we are not inclined to uphold the orders of the lower authorities and therefore we direct the learned assessing officer to allow the loss because of business losses of the proprietary concern. In the result ground number two of the appeal of the assessee is allowed. Disallowance of expenses of personal nature - Held that:- Before the learned commissioner appeals the assessee produced the profit and loss account of one proprietary concern but not of the second proprietary concern. The expenditure in the nature of the copy charges of hard disk are not appearing either in the profit and loss account of any of the proprietary concerns. This expenditure has been debited in the appellant’s individual income and expenditure account. The learned commissioner appeals has noted that the total income and expenditure account claim of the assessee shows that assessee has claimed the expenditure of ₹ 115130/– towards hard disk copy charges in interest expenditure. Out of these the assessing officer disallowed only ₹ 5 6130/–. In absence of the complete details filed before the lower authorities, as mentioned by the learned commissioner of income tax appeals we do not interfere in the finding of lower authorities on disallowance of ₹ 5 6130 out of the total expenditure incurred by the assessee. Penalty u/s 271AAA - Held that:- It was not shown by the revenue that whether the assessee was given an opportunity to explain the source of the undisclosed income and specify the manner in which the undisclosed income, surrendered during the course of search, had been derived. Therefore, the issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in case of principal CIT vs Emirates Technologies Private Limited.[2017 (8) TMI 387 - DELHI HIGH COURT]. We direct the learned assessing officer to delete the penalty of ₹ 3.5 lakhs under section 271 AAA - Decided in favour of the assessee.
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2018 (11) TMI 1428
Disallowance of 20% of the expenditure on account of business promotion expenses and office expenses for want of supporting evidence and full details - CIT-A restricted the disallowance to 10% - Held that:- There is no denial of the fact that the assessee has failed to produce complete details and evidence to substantiate the claim of expenditure as some of the vouchers were self made. Having regard to the facts and circumstances, when the assessee has not substantiated the claim with supporting evidence, we find that the disallowance restricted by the CIT(A) to 10% is just and proper and does not require any interference. Accordingly we reject the ground No. 1 of the assessee’s appeal. Disallowance on account of travelling expenses - self made vouchers for petty expenses - Held that:- We find that the AO has made an ad hoc disallowance for want of complete details of bills and vouchers and some of the vouchers were self made. AO accepted the fact that the self made vouchers were produced by the assessee in respect of the petty expenses and therefore, the major expenditure was supported by the assessee with proper vouchers. Accordingly, in absence of any specific defect in the claim of the assessee except the self made vouchers for petty expenses, the ad hoc disallowance made by the Assessing Officer is not justified. Assessing Officer has not conducted any proper enquiry or has given a finding that the claim of the assessee is excessive or bogus. - Decided in favour of assessee. Disallowance made u/s 40(a)(ia) in respect of the interest paid to various Non-banking Financial Companies (NBFCs) - non deduction of tds - Held that:- Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors as to whether the said parties have deposited the tax or not and further or restrict the addition to 30%. We are of the view the second proviso to section 40(a)(ia) of the Act would be effective retrospective as it was undisputedly inserted to removable the hardship faced by the assesses. Hence, we set aside this issue to the record of the Assessing Officer for limited purpose to verify the fact that the interest income received by these NBFCs have been included in the return of income and offered to tax and then decide this issue in light of above observation. - decided in favour of assessee.
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2018 (11) TMI 1427
Rejection of books of accounts u/s 145(3) - inventory of opening stock and closing stock and its value are not verifiable due to the reason that the assessee filed the return of income for the A.Y. 2012-13 U/s 44AD - Held that:- We find that the AO has pointed out specific defects in the books of account regarding the opening and closing stock and valuation. Further the expenses were not fully vouched and also day to day stock register was not found to be maintained by the assessee. Accordingly we do not find any error or illegality in the orders of the authorities below qua this issue and rejection of books of account is confirmed. Trading addition - Held that:- After rejection of books of account, the Assessing Officer was mandated to estimate the income of the assessee on some proper and reasonable basis. The past history of the declared G.P. is considered as a reasonable and proper guidance for estimation of the income. In absence of any estimation made by AO, the ad hoc addition made by the authorities below is not sustainable. Accordingly, in the facts and circumstances of the case when there is no significant or noticeable decline in the G.P. in comparison to the earlier year whereas there is a significant increase of six times in the turnover. The said insignificant decline in the G.P. cannot be a reason for an addition. Accordingly we delete the addition made by the AO.
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2018 (11) TMI 1426
Exemption claimed by the assessee u/s.11 - educational institution - AO observed that:- assessee is collecting amounts in excess of the prescribed fees from students - Capitation fee accepted in the garb of donation was claimed as corpus donations - Donations were increasing on an year to year basis and corresponding increase in corpus fund - A large number of parents had confirmed that donations paid by them were nothing but capitation fee - Surplus generated by the assessee - price for selling education Held that:- donations received by the assessee from the parents of the students could not be considered as Capitation fee and the surplus income could not be assessed under the head "income from profits and gains of business". Land development expenditure incurred in cash at Chennai and Vellore centers - whether can be considered as not properly vouched and if so, whether it can be construed as funds diverted for use of trustees or specified persons indirectly benefiting them, thereby attracting Section 11(1)(c)? - Held that:- CIT (Appeals) correctly understood the nature of expenses and its quantum after comparing the per acre rate at different places. Nevertheless, he fell in error in sustaining a disallowance to the extent of 10%. CIT(A) did not give any specific reason for sustaining a disallowance to the extent of 10% of the claim. More so since CIT (Appeals) himself had given a finding that per acre land development expenditure incurred in Chennai and Vellore were lower than what was incurred in Bangalore, where admittedly the payments were effected through bank. There is also no case for the Revenue that the land in question was not developed and was not an agricultural in nature when the assessee acquired it - disallowance of any land development expenditure was not warranted. Ex-consequenti there can be no question of any benefit accruing to the trustees or specified persons for applying Section 13(1)(c). Refund of advance fees / tuition fees to students/parents - whether it be construed as funds diverted for the benefit of trustees/ specified persons, thereby attracting Section 13(1)(c)? - Held that:- It is not a case where no evidence was there to prove the refunds. AO had simply refused to believe the evidence filed by the assessee, considering the refunds to been effected in cash. We find much strength in the argument of AR, that if the assessee wanted to siphon off the funds, it need not have received the donations through demand drafts but could have opted to receive it in cash and diverted at source. Considering the preponderance of probability, is in favour of the assessee that the refunds were actually effected. The question of any benefit arising to the trustees or specified persons will not arise, once the payments are accepted as accounted correctly. Acquisition of 22.34 acres of land at Brahmapuram, Katpadi from Smt. B. Ramani for which agreed consideration was ₹ 1,00,00,000/- gave rise to a presumption that the difference amount was coming out of trust funds, resulting in a benefit to Smt. B. Ramani which fell within the meaning of specified person thereby attracting Section 13(1)(c) - Held that:- There can be an advantage to the seller only if he gains something more than its value. Such a benefit can arise to a trustee only if the transactions by him/her entered with the trust, was with the intention to get an advantage and such advantage was not commensurate with the value of the property transferred. Just because a transaction is entered between a trust and trustee, we cannot say that it resulted in a benefit to the trustee. We are therefore of the opinion that CIT(Appeals) was justified in taking a view that there was no violation of Section 13(1)(c) on the above transaction. Advance payment to Smt. B. Ramani for acquiring 6.23 acres of land at Kangaeyanallur, which was later cancelled and refunded resulted in any benefit to Smt. B. Ramani attracting Section 13(1) (c) - Held that:- Assessee trust had paid a sum of ₹ 22,34,000/- to Smt. B.Ramani through cheque dated 03.06.2004 and the amount was returned by Smt. B. Ramani on 20.9.2004, on cancellation of the proposal. Hence the period for which Smt. B.Ramani had the money with her was 3.6.2004 to 20.09.2004. Intention of the trust to acquire the property from Smt. B.Ramani is clear in that the agreement was registered. There is no case for the Revenue that agreed price of ₹ 52,46,570/- was more than the fair market price. Just because the sale did not go through and the amount was returned by Smt.B. Ramani would not be sufficient to hold that she benefited from such transaction. The intention in entering the transaction was not to benefit Smt. B. Ramani, but for acquiring the property for the assessee trust. We cannot say that Section 13(1)(c) stood attracted. We are of the opinion that CIT (Appeals) was justified in taking a view that there was no violation of Section 13(1)(c) on this transaction as well. Advance paid to Shri. Arjunlal Sunderdoss during previous year relevant to assessment year 2006-07 and ₹ 50,00,000/- paid during previous year relevant to assessment year 2007-08, were diversion of income/property of the trust attracting Section 13(1)(c) - Held that:- Case of the AO is that no security was given for such advances nor any interest received from Shri. Arjunlal Sunderdoss. As against this, case of the assessee is that money was intended for developing a property owned by Shri. Arjunlal Sunderdoss, which was to be used by the assessee for its activities. Thus, we cannot say that the advances were given for no reason. In any case, Shri. Arjunlal Sunderdoss is neither a trustees nor a specified person coming within the meaning of Section 13(3). CIT (Appeals) was justified in taking a view that Section 13(1) (c) of the Act could not be invoked here. Acquisition of a property by daughter-in-law of Managing Trustee - application for loan indicating the value of the property meant that assessee had advanced the difference sum through Shri. Prakash, Finance Officer to Smt. S. Preetha, attracting Section 13(1)(c) - Held that:- There is nothing on record to link the acquisition made by Smt. Preetha with the assessee. Just because Finance Office, of the assessee Shri. Prakash had drawn imprest money from the trust would not mean that such money reached the hands of Smt. Preetha. Especially so, when no such admission was made by Shr. Prakash in any of the statements recorded from him. We therefore find no reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals) in this regard. Payment for a property at Chamiers Road, Chennai, which was acquired by GIE in which partners were trustees of the assessee trust, resulted in a benefit to a specified person coming within the purview of Section 13(1)(c) - Held that:- Section 13(1)(c) is attracted only where any income or property of the trust is directly or indirectly used for the benefit of a specified person. Assessee has also mentioned before the ld. CIT(A) that atleast ₹ 22 Crores given by the assessee were out of loans raised on the security of fixed deposits and mortgages and this had not been rebutted by the ld. DR. Loan is a liability and cannot be considered as a property or income of the assessee. It is also not disputed that interest on the loans taken by the assessee for providing the funds were paid by GIE. CIT (Appeals) has also given a finding that GIE had suffered a loss on sale of Chambiers Road property and they had derived no benefit. This finding was not rebutted by the ld. Departmental Representative. Thus we cannot say that the payments were made by the assessee with any intention of benefitting its trustees or the firm M/s. GIE, nor can we say that they benefitted from it. We thus do not find any reason to interfere with the order of the CIT (Appeals) on this issue. Using money of trust acquire the property - Held that:- Sum paid to Shri. Sampath, one of the trustees for acquiring a property at 56 & 56A, Thirumalai Pillai Road, Chennai which was later returned by the said Shri. Sampath, when the acquisition did not go through, resulted in any benefit to Shri. Sampath, coming within the purview of Section 13(1) (c) - Held that:- Argument of AR that this acquisition was planned as an alternative to the proposal for acquiring the Chamiers Road property which fell through due to defects in title, carries much strength. The question of benefit arising to a trustee or specified person would arise only if the transactions were entered with the intention of benefiting such person. Flow of events clearly indicate that Shri. Sampath had not benefited himself, by using the money of the trust. His intention was only to acquire the property for the trust. Just because the transaction did not go through, would not mean that Shri. Sampath, had directly or indirectly benefited from it. We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in holding that there was no violation of the nature mentioned in Section 13(1)(c) We are alive to the fact that in the statements recorded during the search, trustee /related parties had admitted personal income aggregating to 7.87 crores. However, at no point did they say that this was part of trust funds. Shri. Sampath and his wife who had admitted G5.69 crore out of 17.87 crores, were admittedly having their own business and independent source of income. That apart aggregate of funds alleged to have been diverted came to 98.66 crores and what were admitted as personal income by trustees/relatives were only G7.87 crores. Revenue was unable to bring on record any unexplained investments or asset held by the trustees and their relatives, which could reflect such diversion of income. Thus the onus which was on the Revenue to show diversion of income or property of the trust for the benefit of trustees or specified persons was not discharged. Validity of notice issued u/s.153A - sustenance of disallowance to the extent of 10% of land development expenditure - Held that:- Initiation of proceedings under section 153A of the Act by the learned Assessing Officer is in accordance with law because from the search proceedings various materials revealed that there is a possibility of the assessee having undisclosed / concealed income due to furnishing of incorrect particulars. Therefore, as pointed out by the learned Departmental Representative and the decisions relied upon by him, we find that issuance of notice under section 153A in the case of the assessee is valid in law for all the three assessment years. Estimation of land development expenditure - Held that:- There was no reason for disallowing any part of such expenditure. For the reasons stated therein, we delete the disallowance of land development expenditure. TDS credit - Held that:- Assessee is also aggrieved on credit being not given for the tax deducted at source. We direct the ld. Assessing Officer to verify the claim of the assessee and give credit, if due.
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2018 (11) TMI 1425
Claim for set off of share trading loss against other income - Held that:- CIT(A) has allowed the same after having found that the case of the assessee was not covered under Explanation to section 73. He also found that income shown by the assessee to the extent of ₹ 66,22,069/- was in the nature of speculation income only and accordingly held that the assessee company even otherwise was eligible to set off its share trading loss against the said income. At the time of hearing before us, entitled the DR has not been able to bring on record anything to rebut or controvert the findings recorded by the CIT(A). As a matter of fact, the revenue in the ground specifically raised in its appeal has clearly admitted the fact that speculation income of ₹ 66,22,069/- was declared by the assessee company. No justifiable reason to interfere with the impugned order of the CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss ground no. 1 of revenue’s appeal. Disallowance of 50% of expenses claimed under the various heads - addition restricted by the CIT(A) to 10% after taking into consideration the fact that the assessee company had maintained regular books of account, which were duly audited u/s. 44AB and the expenses claimed were duly supported with bills and vouchers - Held that:- The relief given by the CIT(A) to the assessee on this issue is well founded and the disallowance sustained by the CIT(A) being fair and reasonable in the facts and circumstances of the case, we uphold the impugned order on this issue and dismiss ground no. 2 of the revenue’s appeal.
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2018 (11) TMI 1424
Disallowance u/s 14A r.w.s. 8D - Held that:- We find that in the assessee’s own case, this Tribunal has already held that the disallowance under Rule 8D is to be computed only on the investments which have yielded exempt income and not on the entire investments. CIT(A) has accordingly computed the disallowance. Rule 8D has come into force w.e.f 24th March, 2008 and the Hon’ble Bombay High Court in the case of ITO vs. Daga Capital [2008 (10) TMI 383 - ITAT MUMBAI] has held that the said provision is applicable prospectively. The decision relied upon by the Assessee is for the A.Y. 2005-06 as is evident from para 3.1 of the said judgment, therefore, the said decision is not applicable to the case of the assessee and we see no reason to interfere with the order of the CIT(A) - Decided against assessee.
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2018 (11) TMI 1423
Deduction u/s 80-IA - projects as infrastructural projects eligible for deduction - Held that:- As the projects being carried out during the year under consideration are the same as in A.Y. 2012-13, no reasons to deviate from the conclusions drawn by my colleague Commissioner of Income Tax (Appeals) in the assessee's own case for Assessment Year 2012-13 that all these projects are infrastructural projects eligible for deduction u/s.80IA(4). Thus hold that all the projects being carried out by assessee are infrastructural projects and not work contracts, and hence assessee is eligible for deduction under section 80lA on the profits from all the projects carried out during the year under reference. Hence direct the Assessing Officer to allow deduction under section 80lA as claimed by the assessee. - decided against revenue
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2018 (11) TMI 1422
Addition treating the agricultural income as income from other sources - D.R. contended that assessee did not produce the Landlord for verification of the facts as well as did not produce documentary evidences to prove earning of agricultural income - Held that:- In the absence of any evidence on record and the fact that assessee did not avail any opportunity at the remand proceedings at the appellate stage would clearly disentitle the assessee to claim benefit of agricultural income. Considering the above facts and in the absence of any representation and any evidence on record, no interference is called for in the matter. Confirm the Order of the CIT(A) and dismiss the appeal of assessee.
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2018 (11) TMI 1421
Revision u/s 263 - payment of amount to cricket players - allowable business expenses - as per the payments to cricket players were made on account of fee for displaying of the assessee’s company’s logo which helped in improving the brand value of the company and, therefore, the AO had erred in allowing the entire expenditure rather than allowing 1/5 of the expenditure - Held that:- Relevant details and documents were furnished by the assessee during the assessment proceedings and forms part of the record. No inference can be drawn that the AO has not examined the issue although he has not expressed it in as many terms as may be considered appropriate by his superior authority and even if the same is found to be inadequate the same cannot be a ground for revision. It is clear that an order cannot be termed as erroneous unless it is not in accordance with law. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the AO. Therefore, it cannot be held that in the instant case the AO’s order was erroneous and prejudicial to the interest of the revenue within the terms of section 263 of the Act. Once the impugned issue was considered and examined by the AO Commissioner cannot set aside the order without recording a contrary finding. - Decided in favour of assessee.
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2018 (11) TMI 1420
Eligible for deduction u/s 80P - interest earned on deposits with Bank of Baroda and from saving bank account is not business income and hence not eligible for deduction - Held that:- As per section 80P(2)(a)(i) of the act the interest income earned on providing credit facility to its members is deductible u/s. 80P(2)(a)(i). After perusal of the aforesaid provision of the act we observe that deduction u/s 80P(2)(a)(i) is not available on the interest earned on deposit maintained with the commercial bank. We find that has decided the identical issue in favour of the Revenue vide State Bank of India vs. CIT (2016 (7) TMI 516 - GUJARAT HIGH COURT) wherein it is held that interest income on deposit placed with the commercial banks is not exempt u/s. 80P(2)(a)(i). We are inclined with the decision of the ld. CIT(A) that investing surplus funds in a commercial bank is no part of the business of providing credit facilities to its members which is not deductible under section 80P(2)(a)(i) of the act - we direct the assessing officer to allow pro rata expenses in respect of interest earned from deposit held with nationalized bank to the assessee for computing the deduction u/s. 80P after examining/verification and affording adequate opportunity to the assessee
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2018 (11) TMI 1419
Revision u/s 263 - claim of deduction under section 10AA - Held that:- Once all the relevant record and material in respect of the claim of deduction under section 10AA was available on the assessment record and were examined by the Assessing Officer while allowing the claim of the assessee, then the learned Principal Commissioner of Income-tax cannot exercise his jurisdiction under section 263 only for the purpose of setting aside the order and directing the Assessing Officer to re-do the assessment. Hence, in view of the above facts and circumstances of the case as well as the decision of the hon'ble Delhi High Court in the case of ITO v. DG Housing Projects Ltd. (2012 (3) TMI 227 - DELHI HIGH COURT) we find that the impugned order passed under section 263 is not sustainable in law. - Decided in favour of assessee.
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2018 (11) TMI 1418
Levy of penalty u/s.271D - assessee has not been able to substantiate its claim for receiving amounts in cash - Held that:- When the language of the provision is crystal clear, the object of the purpose of the enactment of the said provision would no more have any say in the matter. A plain reading of Sec.271D establishes that it is a mandatory provision and a person contravening the provisions of Sec.269SS in any manner cannot escape from the payment of the penalty of equivalent amount so received as loan or deposit by him, unless exceptional and reasonable cause is proved. It is a well settled principle of interpretation that the taxing statutes have to be construed strictly and that when the language is clear and unambiguous it has to be construed in the literal sense bereft of any equitable or social reasons or any hardship likely to be suffered. Thus, as the assessee has not been able to substantiate its claim for receiving amounts in cash from Dr.A.M.Arun in violation of provisions of Sec.269SS, the penalty levied u/s.271D as levied by the Addl. Commissioner and as confirmed by the CIT(A) stands confirmed. The decision in the case of M/s.Idhayam Publications Ltd. [2006 (1) TMI 97 - MADRAS HIGH COURT] has no application on the facts of the present case and the principles laid down by the Hon’ble Jurisdictional High Court in the case of Shri P.Muthukaruppan [2015 (7) TMI 848 - MADRAS HIGH COURT] and Nandhi Dhall Mills [2015 (3) TMI 19 - MADRAS HIGH COURT] have been rightly applied by the Addl. Commissioner and the Ld.CIT(A). Levy of penalty u/s 271E - Held that:- The assesses herein has been used as the custodian of the unaccounted cash of J. Dinakaran by depositing it in the bank accounts of the assesses herein by their shareholder and director Dr.A. M. Arun. The assessee have not been able to give any explanation to substantiate with evidence for the repayment of the deposits to Dr.A.M.Arun in cash. As and when J. Dinakaran required the cash the cash seems to have been withdrawn by Dr. A. M. Arun from the bank accounts of the assesses herein and paid to J. Dinakaran. The question that has been raised that the moneys given by the shareholder and Director to the Private Ltd. Company is not a loan or deposit because no interest has been charged, would not hold well in so far as the balance sheet of the assessee clearly shows that Dr.A.M.Arun is an unsecured creditor. The assessee is also not able to give a term to the moneys deposited and withdrawn in the bank account of the assessee companies by Dr.A.M.Arun other than the term “deposit”. A deposit need not be interest bearing. So also a loan. A deposit is putting money into the account of the assessee and that is exactly what has been done by Dr.A.M.Arun in the case of the assesses herein and that deposit has been returned/withdrawn by Dr.A.M.Arun. Penalty u/s.271E as levied by the Addl. Commissioner and as confirmed by the Ld.CIT(A) is on a right foot and does not call for any interference. - Decided against assessee.
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2018 (11) TMI 1417
Scrutiny assessment u/s 143(2) - no valid and legal notice u/s. 143(2) being issued by assessee’s Assessing Officer (ITO Ward 1(5), Faridabad) as defined in Section 2(7A) - transfer of case u/s 127 - Held that:- Since assessee was regularly filing return from AY 2012-2013 onwards at Faridabad same Address so he requested that case should be transferred to Faridabad as jurisdiction lies with Faridabad only due to which case was transferred to Faridabad AO as admitted in first para of AO order, vide order u/s 127 dated 28.03.2017 passed by PCIT Hazaribagh. Without any valid notice issued u/s 143(2) of the Act by Faridabad AO, impugned assessment is framed by ITO Ward 1(5) Faridabad, simply in extension to proceedings initiated by Hazaribagh DCIT Circle 2 who is admittedly not AO of assessee within meaning of section 2(7A) of the Act on date of issue of notice u/s 143(2) of the Act. So on this short count itself impugned proceedings deserves to be quashed being unsustainable in the eyes of law. Thus present assessment is void ab inito, hence, the same is quashed and accordingly, the additional legal ground raised by the assessee is allowed.
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2018 (11) TMI 1416
Unexplained cash credit u/s 68 - share premium receipts - Held that:- The assessee filed sufficient evidences viz, return of income, share allotment, annual return, details including name, address and PAN of the shareholder which are not negated by the AO. AO in the present case has himself assessed the preference shareholder for the assessment year under consideration and after scrutiny has passed the order u/s 143(3) around the same date and has neither made any addition nor made any adverse remarks. AO has not questioned the preference share capital to the extent of the face value but has only questioned the share premium. By this action of the AO himself, the 'nature' of transaction as that of 'preference share allotment' is proved beyond doubt and merely because he feels that the share premium is high the genuineness of the transaction cannot be doubted for the purpose of section 68 of the Act. As evident from a parallel amendment in section 56(2) which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the Ld CIT-DR's contentions that section 68 of the Act can he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. As explained that it is a settled law that where two views are possible, the view favorable to the assessee should be adopted as held in case of CIT Vs. Vegetable Products Ltd.[1973 (1) TMI 1 - SUPREME COURT]. We are of the view that the assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 and no addition can be made on this account. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. - Decided against revenue. Disallowance of expenses relatable to exempt income made by the AO by invoking the provisions of section 14A of the Act read with Rule 8D - Held that:- CIT(A) deleted the disallowance only on the premises that the assessee has not earned any exempt income and hence following the Delhi High court decision in the case of Cheminvest Limited vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT), deleted the disallowance only on the premises that the assessee has not earned any exempt income and the only grievances of the department is that the provisions of section 14A read with Rule 8D of the Rules are to be applied even where the investment has not yield in exempt income. We find that this legal position is now settled that the provisions of section of 14A of the Act cannot be applied in the absence of any exempt income earned in a particular year by the assessee. CIT(A) has rightly deleted the addition and we confirm the same. Disallowance of expenses being interest under section 36(1)(iii) - diversion of interest bearing funds as interest free advances to Nariman Infrastructure LLP wherein the assessee company has 50% of stake through its 100% subsidiary of Piramal Commercial Estates LLP and there is commercial expediency in the transaction for advancing this interest free loan - Held that:- The advance of interest free loan have been made only for the purposes of assessee’s business and according to its corporate strategy. We find that the assessee is engaged in the business of real estate and its development. For this purpose it has this amount of ₹ 0.83 crores to Nariman Infrastructure LLP as it has a stake of 50% in Nariman Infrastructure LLP through its 100% subsidiary Piramal Commercial Estates LLP. CIT(A) has clearly observed that this transaction is on account of principle of commercial expediency, which was never contested by Revenue. Hence, we confirm the order of CIT(A) and dismiss this issue of Revenue’s appeal.
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2018 (11) TMI 1415
Disallowance u/s 14A - Held that:- Section 14A of the Act can be triggered only if assessee seeks to square off expenditure against the income which does not form part of total income under the Act and Section 14A of the Act cannot be invoked where no exempt income was earned in the relevant assessment years. In consonance with the judicial precedents, we do not see any infirmity in the conclusion drawn by the CIT(A) for non-applicability of Section 14A of the Act in the facts of the case. Action of the CIT(A) in granting relief on the disallowance (suo moto made by the assessee) beyond the return of income and in the absence of any formal revised return - Held that:- Mere admission on the part of the assessee with respect to an addition/disallowance in its original return or in revised return would not ipso facto bar an assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. It is thus well settled that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. The Revenue authorities cannot enforce untenable actions of the assessee against it which led to declaration of income of higher amount incorrectly. It is thus open to assessee to show that it was over assessed in correctly owing to its own mistake. No potency in the argument laid on behalf of the Revenue that the CIT(A) allegedly committed error in granting total relief in the matter of disallowance u/s 14A. In our considered view, the action of the CIT(A) in granting relief under s.14A on account suo moto disallowance by the assessee and thereby granting relief higher than claimed in the return of income cannot be faulted in law. Appeal of the Revenue is dismissed.
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2018 (11) TMI 1414
Disallowance of provision for wages - allowable deduction u/s 36 - as per AO only actual amount paid towards agreement arrear is an allowable deduction and no any provision to meet such future liability, accordingly, the Assessing Officer disallowed the claim - Held that:- The assessee has duly explained that the last wage revision was done for the period 01/01/2009 to 31/12/2013 and thereafter the wages revision was due from 01/01/2014 till 31/3/2015, thus the assessee had made provisions of revised wages for the period from 01/01/2014 to 31/3/2014 i.e. 3 months of the financial year relevant to assessment year under consideration. The provision has been made by the assessee for three months of revised wages which finally to be approved by the government w.e.f. 01/01/2014. Once the revision of wages has to be w.e.f. 01/01/2014 and there cannot be any gap between expiry of the last revision and the new revised wages then the said liability to pay the revised wages is an actual and ascertain liability for the period 01/01/2014 to 31/3/2014 though, the quantification and crystallization of the amount comes later on when the revision is approved by the State Government. As decided in assessee's own case [2014 (8) TMI 1127 - ITAT JAIPUR] the liabilities have been created by statutory rule which assessee is bound to follow. This provision has been created for amicability with the employees and is for the commercial benefit of the assessee bank and is to be held as wholly and exclusively for the purpose of business. In this eventuality, the payment is even otherwise allowable U/s 37 of the Act. Any perceived method of calculation by the Assessing Officer cannot be held as a tool to disallow the assessee’s claim. The revenue’s interest is safeguarded by a fact that if at all there is any mistake in the calculation, the access are short calculation will be given suitable treatment in books of account in subsequent years. This being so in our considered view, the assessee is eligible for claim of PACS Manager Fund payment as expenditure. - decided in favour of assessee Disallowance u/s 14A - Held that:- CIT(A) has noted the fact that the assessee has not received any exempt income during the year under consideration. Further, the assessee has made investments in the shares of Apex bank and has not used any borrowed fund for the purpose of investment. This fact has not been disputed by the revenue before us that the investment was made from the assessee’s own interest free funds and further when no exempt income was earned or received by the assessee during the year under consideration then in view of the various decisions as referred and relied upon by the ld. CIT(A) including the decision of Hon’ble Delhi High Court in the case of Chemnivest Ltd. Vs. CIT-IV [2015 (9) TMI 238 - DELHI HIGH COURT] no disallowance is called for U/s 14A - decided in favour of assessee
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2018 (11) TMI 1413
Allowability of Deduction u/s 35(2 AB) - weighted deduction claimed u/s 35(2AB) in respect of R&D expenditure - assessee was not approved by the prescribed authority u/s 35(2AB) - Held that:- Unless the R&D facility is approved by the competent authority, the assessee shall not be eligible for weighted direction u/s 35(2AB). In this case, on perusal of facts available on record, it is abundantly clear that the competent authority has categorically stated that the assessee’s R&D facility had not been approved for the impugned assessment year, in a reply filed to the AO, in response to notice issued u/s 133(6). Therefore, we are of the considered view that the assessee is not eligible for weighted deduction u/s 35(2AB) in respect of R&D expenditure. Alternative submission of assessee if it is held that the assessee is not eligible for weighted deduction u/s 35(2AB), at least the deduction should be allowed u/s 37(1) in respect of expenditure incurred towards R&D facility - Held that:- We find merit in the argument of the assessee for the reason that if the assessee is not eligible for weighted deduction u/s 35(2AB), the expenditure towards such R&D facility cannot be disallowed when the assessee has filed necessary details to prove genuineness of such expenditure. In this case, on perusal of details, we find that the AO has never doubted the expenditure incurred by the assessee towards its R&D activities. The AO also not doubted the genuineness of such expenditure. Therefore, we are of the considered view that once the assessee has proved expenses with a necessary evidence, there is no reason for the AO to disallow such expenditure u/s 37(1) of the Act. Hence, we direct the AO to allow revenue expenditure incurred by the assessee to the extent u/s 37(1) Disallowance u/s 14A r.w. Rule 8D - suo moto disallowance by assessee - Held that:- The assessee has made suo moto disallowance of ₹ 10,000 considering the nature and amount of dividend income earned for the year. Admittedly, the assessee has earned dividend income of ₹ 3,945 as against which it has made disallowance of ₹ 10,000 towards expenditure incurred in relation to exempt income. As in the case of CIT vs Cheminvest Ltd vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT]) held that disallowance contemplated u/s 14A shall not exceed exempt income. Thus disallowance worked out by the AO by invoking Rule 8D(2)(ii) & 8D(2)(iii) is in excess of exempt income earned for the year - we direct the AO to restrict disallowance to the extent of suo moto disallowance of ₹ 10,000 made by the assessee.
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2018 (11) TMI 1353
Bogus long term capital gain - addition u/s 68 - claim of exemption u/s 10(38) rejected - addition on the strength of statement of third party - non providing cross examination - denial of natural justice - Held that:- The transactions have been done by BSE through proper banking channels evidenced by supporting documentary evidences. Moreover, securities transactions tax has also been paid. Merely on the strength of statement of third party i.e. Shri Vikrant Kayan cannot justify the impugned additions. Moreso, when specific request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross-examination. This is in gross violation of the principles of natural justice and against the ratio laid down in the case of Andaman Timber Vs. CIT 2015 (10) TMI 442 - SUPREME COURT) - no merit in the impugned additions. The findings of the CIT(A) are accordingly set aside. The Assessing Officer is directed to allow the claim of exemption u/s 10(38) of the Act.- decided in favour of assessee.
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Customs
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2018 (11) TMI 1404
Interpretation of Statute - Notification No. 40/2006-Cus dated 01.05.2006 - ara 4.55.3 of the Handbook of Procedure for Export and Import - export of goods - pan masala - gutka - DFIA Scheme - According to the Revenue, the effect of the HBP and the exemption notification was that the assesse had to mention the technical characteristics, quality and specifications of the perfumes/essential oils/ aromatic chemicals used by it in its shipping bills. Held that:- This court is of the considered view that the revenue s argument is merited and deserves acceptance. The DFIA scheme was intended to permit duty free import of inputs used in the manufacture of exported goods. The licenses issued by the DGFT thereunder are subject to the conditions stipulated in the HBP. Insofar as the license is in respect of the products specified in paragraph 4.55.3 thereof, the licensee is required to furnish a declaration with regard to the technical characteristics, quality and specification in the shipping bill. Interpretation advanced by the assessee, (and accepted by the Tribunal) is that the declaration requirement of the exemption notification is applicable only if the exported goods are included in the list of items enumerated in paragraph 4.55.3. This contention cannot be accepted - The consequence of the assessee s interpretation would render it impossible to correlate the duty-free imports made under the DFIA, with the inputs used in the exported products. Further, if the resultant products are those enumerated in paragraph 4.55.3, then this interpretation would require a declaration of the quality, technical characteristics and specification of the materials used in those items. Such a construction, in this court s opinion, is unreasonable as the DFIA is intended to exempt inputs used in production of other goods in India, and is not concerned with the materials that have been used in the production of those inputs. The questions of law framed are answered in the affirmative, i.e. in favour of the revenue and against the assessee - Appeal allowed.
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2018 (11) TMI 1403
Imposition of late fine charges with penalty - petitioner has prayed for direction to the respondents to remove "Alert" inserted against the petitioner in its electronic system - Held that:- In a Writ Petition, we would be extremely slow in striking down the show cause notice unless the petitioner demonstrates lack of jurisdiction or breach of natural justice or some such defect which goes to the very root of the matter. In the present case, we do not notice any such ground to quash the notices in exercise of writ jurisdiction. The petitioner must reply to the show cause notices and cooperate in the adjudication thereof. The petitioner has so far not filed any reply. If the petitioner wishes, such replies may be filed latest by 10.12.2018. The petitioner shall cooperate with the adjudication of such notices. The amount demanded by the department and the recovery of which is made a precondition for clearing the future Bills of Entry of the petitioner is the same for which the department has issued show cause notices to the petitioner calling upon the petitioner why such demands should not be confirmed. On the other hand, the department seeks recovery of such amount coercively by blocking the petitioner's future clearances. Obviously, there cannot be recovery coercively made even before the demand is confirmed. The respondents are directed to delete the name of the petitioner from the 'Alert' list - Petition disposed off.
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2018 (11) TMI 1402
Principles of natural justice - petitioner has contended that he has never been given an opportunity to defend himself - Confiscation of seized Gold Ornaments - Held that:- The petitioner has an efficacious alternative remedy under Section 128 of the Customs Act - if the questions are answered on merits, the petitioner will loose an opportunity of invoking the appellate Tribunal. The Writ Petition is closed, leaving it open for the petitioner to approach the appellate authority under Section 128 of the Act.
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2018 (11) TMI 1401
Clandestine removal - made ups and ready to wear garment like shirts, ladies night wear - seizure of said goods - Held that:- As regard the goods were intercepted in the bus of the appellant M/s SCCPL at check post. It is clear that the goods were intended to be taken out from SEZ premises, however the goods were not cleared out of SEZ, therefore, no liable to duty at that stage - However, since, there was attempt of clandestine removal, the goods were correctly liable for confiscation. Hence, the confiscation of the goods i.e. 789 pieces of readymade garment and consequential redemption fine is upheld. Confiscation of the goods at the premises of Maruti Trading Company and Ashok Industries - Held that:- As per reconciliation provided by the appellant, the goods shown to have purchased by both the units are well within the duty paid goods cleared by M/s. Saffire Clothing Co. Pvt Ltd. Moreover, there is no evidence of movement of goods without payment of duty from SEZ to M/s. Maruti Trading Company and Ashok Industries. Since, there is physical checking at the check post and no evidence was found that any goods over and above the goods recorded, which were cleared on payment of duty were found, it cannot be said that the goods found in the premises of M/s. Maruti Trading Company and Ashok Industries is a clandestine removal from the appellants company - In the present case the goods were seized from premises of Maruti Trading Company and Ashok Industries, therefore, the confiscation and redemption fine against the appellant is illegal and incorrect - neither the goods found in premises of M/s Maruti Trading Company and Ashok Industries was liable to confiscation nor it is attract duty as same was not proved to have been cleared clandestinely from the premises of the M/s SSCPL therefore, the demand on the goods seized from the Maruti Trading Company and Ashok Industries is set aside. Penalty on employees - Held that:- Majority of demand is set aside, moreover the employees are not beneficiary against any offence committed, if any - the employees are not liable for penalty. Appeal allowed in part.
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2018 (11) TMI 1400
Rectification of Mistake - imposition of penalty - error apparent on the face of record - Held that:- The Tribunal vide order dt. 11/01/2016 has allowed the appeal of the appellant/assessee by passing a detailed order. Further the learned AR could not pin point as to what is the error which is apparent on the face of the order which needs to be corrected. The Revenue has raised all the grounds in this application which were there before the Hon'ble High Court and subsequently, the Revenue has withdrawn the appeal before the High Court to move this application without pin pointing any error on the face of the record - there are no error apparent on the face of the record - ROM application allowed.
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2018 (11) TMI 1399
Refund of SAD - N/N. 102/2007-Cus. dt. 14/09/2007 - denial on the ground that there is a mis-match between the imported goods and the goods sold by the appellant - Held that:- CBEC vide Circular No.6/2008 Cus. dt. 28/04/2008 has clarified that the document evidencing payment of VAT/ST duly issued by or acknowledged by the concerned VAT/ST authorities shall be submitted by the importer. The CBEC has also clarified that a certificate from the statutory auditor certifying that the importers' annual financial accounts under the Companies Act or any statutory act correlating the payment of service tax / VAT on the imported goods that the invoices of sale would be sufficient proof of payment of appropriate VAT for the purpose of the said notification. The appellants have produced Chartered Accountant certificates in each of the appeals certifying the correlation between the imported goods and the goods sold. The certificate issued by the Chartered Accountant have not been considered at all by the authorities below and consequently they have rejected the refund claim on the ground of non-compliance of the conditions of the notification which according to me is not tenable in law specifically when the Chartered Accountant have certified the correlation. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (11) TMI 1408
Territorial jurisdiction - whether High Court of Madras has the territorial jurisdiction to entertain the suit filed by the appellants herein? - correctness of the order granting leave to the plaintiffs permitting them to institute the suit in Chennai, under Clause 12 of the Letters Patent - Held that:- Grant of leave is discretionary and for granting leave the Court is governed by the principle of forum conveniens. In the instant case, having regard to the fact that the holding company (defendant No.11) as well as the company on whose behalf the suit was filed (defendant No.2) were situated in Dubai and the shareholders of defendant No.2 were having disputes inter se, who were also residents of Dubai, the Courts in Dubai were better equipped to deal with such a dispute. It is the dispute between the plaintiffs and Defendant nos. 3 to 7 who are all residents of Dubai. Even Defendant No. 2 whose beneficial interest is claimed by the plaintiffs is a Company incorporated in Dubai, UAE. Merely, because the dispute is about those shares which are issued by Indian Company would not lead to the conclusion that cause of action has arisen in India. It is obvious that insofar as Defendant No. 1/Indian Company is concerned it has nothing to do with the dispute. The relief of declaration which is sought is that Defendant Nos. 3 to 7 are not the real owners of such shares and its actual/beneficial owner is Defendant No. 2. Such a dispute would not bring jurisdiction of Chennai courts simply because Defendant No. 1/Indian Company has its registered office in Chennai. Even if it is presumed that the plaintiffs ultimately succeed in their action, when brought in a competent court in Dubai, and a declaration of the aforesaid nature is given by the said court, Defendant No. 1 can always act thereupon. We find that court in Dubai would be more convenient forum to decide the dispute between the parties who are residents of Dubai and which revolves around Defendant no. 2, again a Company registered and situate in Dubai. The High Court also appears to be right in holding that the relief sought for against Indian Company, at best, is a consequential one and cannot give a cause of action. Even Defendant no. 2 cannot seek such a relief without resolving its dispute as against Defendant nos. 3 to 7. Such a dispute can only be dealt with by competent forum in Dubai as per the law prevailing in Dubai, UAE.
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2018 (11) TMI 1407
Correctness of termination orders of petitioners from employment - unlawful termination and restoration to service - preliminary objection raised on behalf of respondent-employer is that writ petition is not maintainable as it is not a ‘State’ within the meaning of Article 12 of Constitution - Whether CUPGL can be said to be ‘State’ within the meaning of Article 12 of Constitution? - Held that:- Position of CUPGL in the case in hand, it cannot be doubted that its functional control is in the hands of Public Sector Companies like, BPCL, GAIL and IGL. Clause 120 of Article of Association of CUPGL shows that so long as holding is equal, both i.e. BPCL and GAIL will have equal representation in the Board. Chairman of Board of CUPGL shall be either a whole time Director of GAIL or Chairman or Managing Director of BPCL or his nominee. Therefore, GAIL and BPCL both have pervasive control in CUPGL. Since holding Companies are Central Government Companies, which have pervasive control, and BPCL having already been held to be 'State' within the meaning of Article 12 of Constitution, we do not find any hesitation in holding that CUPGL is an instrumentality of State and within the ambit of term 'other authorities' under Article 12 of Constitution of India it is a 'State' within Article 12. Question-(1), therefore, is answered accordingly. Relationship between Government (employer) and Government Servant (employee) is not like an ordinary contract of service between a master and servant. The legal relationship is something entirely different, something in the nature of status. In the language of jurisprudence, 'status' is a condition of membership of a group, whereof powers and duties are exclusively determined by law and not by agreement between the parties concerned. Thus, where appointment and conditions of service are governed by Statute, relationship of 'employer' and 'employee' is that of 'status' and not a mere contract. However, in other cases, it is purely a contract of service resulting in a relationship of ordinary master and servant. In the present case also, relationship of employment between petitioner and CUPGL is purely and simply an ordinary contract of service which is not governed by any statute or statutory provision. In such cases, a contract of service cannot be sought to be enforced by Court of law by giving relief of reinstatement or continuance in employment as this relief is barred under Act, 1963. In Vidya Ram Misra Vs. Managing Committee, Shri Jai Narain College (1972 (1) TMI 110 - SUPREME COURT) Court said that it is well settled that when there is a termination of a contract of service, a declaration that the contract of service still subsists would not be made in the absence of special circumstances, because of the principle that Courts do not ordinarily enforce specific performance of contract of service.
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2018 (11) TMI 1406
ROC power to remove the name of a company from the Register of the Companies - Held that:- Tribunal has failed to decide as to what is the specific violation committed by the company for removing its name from the Register in terms of Section 248 of the Companies Act. For the reasons aforesaid, we have no other option but to set aside the order. The impugned order is accordingly set aside. The matter is remitted to the Tribunal to reconsider the case taking into consideration of the provisions of Section 248 and sub-section (3) of Section 252 of the Companies Act as also all the relevant evidence filed by the appellant in its support.
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2018 (11) TMI 1405
NCLT's power of review - Held that:- Error apparent on the face of record means an error which strikes on mere looking and does not need long drawn out process of reasonings on points where there may conceivably be two opinions. If the present matter is seen, it cannot be compared with the facts of the matter of Assistant Commissioner, Income Tax. A biding Judgement of the Hon’ble High Court was there which had found Trust entitled to exemption which Judgement had not been noticed by the Income Tax Appellate Tribunal. When the same was brought to the notice of the Tribunal, it accepted that it was error apparent on the face of record. If a Trust is entitled to exemption has been held by the High Court, in the jurisdiction of the High Court in view of Article 227 of the Constitution of India, it would be the applicable law. It would have to be applied universally in that jurisdiction and pointing out the assessee to be Trust would be enough. However, in the matter of delay and latches, it is always mixed question of law and facts. Going through the Impugned Judgement of the NCLT, we find that it is very well reasoned and there is no error in the Judgement. The NCLT has rightly concluded that it could not review the Judgement dated 29th May, 2017 and the effort to say that there is error apparent on record to recall the whole Judgement dated 29th May, 2017 and rewrite the same after taking note of the Judgements and arguments Appellants wanted to rely on, was clearly not acceptable. Such exercise cannot be said to be error apparent on the face of record in the set of facts which we have. There is no substance in these Appeals. Each of these Appeals is dismissed
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Insolvency & Bankruptcy
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2018 (11) TMI 1411
Initiation of Corporate Insolvency Resolution Process - sale of flats with assured return plan - developer failed to refund the assured - Financial Debt - corporate debtor committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh - Held that:- The applicant being a home buyer comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a unit. Though considerable long period has since lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor. It is accordingly reiterated that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects. Accordingly, in terms of Section 7(5)(a) of the Code, the present application is admitted.
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2018 (11) TMI 1410
Initiation of Corporate Insolvency Resolution Process - booking of three flats - buy-back agreement cum guarantee deed - application under Section 7 of the Code - Held that:- Since the amount has been raised from the petitioner/allottee under a real estate project, not only the debt has a commercial effect of borrowings and come within the scope of 'financial debt' but also the petitioner comes within the definition of 'financial creditor'. - Therefore, petitioner being a financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the code against the respondent corporate debtor in case of default in repayment of financial debt. Dispute over the quantum of default, cannot be a ground for rejection of an application under Section 7 of the Code as the determination of quantum of financial debt is not within the domain of the Adjudicating Authority. In the present proceeding the Tribunal is not supposed to ascertain the quantum of amount of default or to pass a decree as to how much is actually due to the applicant financial creditor. The Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. Adjudicating Authority is only to ascertain the existence of a default and not the exact amount due. Whether respondent corporate debtor has committed default in payment of the financial debt - applicant being a home buyer comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of three flats. Though considerable long period has since lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor. It is accordingly-reiterated that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Besides it is also seen that the application filed in Form - I under Section 7 of the Code read with Rule 4 of the Rules is complete and there is no infirmity in the same. Moreover the material on record reveals that there is no disciplinary proceeding pending against the proposed IRP. In the facts we are satisfied that the present application is complete and there has been a default in payment of the financial debt and that no disciplinary proceeding is pending against the proposed IRP and therefore, the applicant financial creditor is entitled to initiate Corporate Insolvency Resolution Process under Section 7 of the Code. Accordingly, in terms of Section 7(5)(a) of the Code, the present application is admitted.
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2018 (11) TMI 1409
Initiation of Corporate Insolvency Resolution Process - maintainability of application before this Tribunal - place of circle office to confer jurisdiction on the Tribunal - default of payment of operational debt - Held that:- The operational creditor shown in Form 5, the circle office address of the corporate debtor as if it is its registered office. The demand notice in Form 3 was sent to the corporate debtor to three address. One of the address is at Gurgaon State of Haryana. It is true the Tribunal in whose jurisdiction registered office of the corporate debtor is situated an application under section 9 of I&B Code is to be filed before the said Tribunal. The place of the registered office of the corporate debtor confers jurisdiction on the Tribunal for application filed under section 9 of I&B Code. Circle office of the corporate debtor can’t be taken for initiating action against corporate debtor under section 9 of the code by the operational creditor. May be the circle office of the corporate debtor is in Hyderabad. However the place of circle office can’t confer jurisdiction on the Tribunal to proceed against corporate debtor. The place of registered office of corporate debtor is deciding factor regarding jurisdiction according to section 61 of I&B Code. Corporate debtor filed a copy of order passed by R.D at Page 109 of preliminary objections that the registered office of corporate debtor was shifted from New Delhi to Gurgaon State of Haryana. The registered office of corporate debtor was originally at New Delhi. It is clear from lease deed which is relied by the operational creditor. As on the date of filing the present petition. The registered office of the corporate debtor is situated at Gurgoan State of Haryana. Therefore operational creditor can’t maintain this application filed under section 9 of I&B Code in this Tribunal. Operational creditor has to file application against corporate debtor before concerned NCLT having jurisdiction over the place of registered office of corporate debtor.
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PMLA
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2018 (11) TMI 1398
Offence under PMLA - provisional attachment order - whether the provisional attachment order and confirmation thereof have been passed as per well settled law or not? - Held that:- There is no nexus whatsoever between the alleged crime and the bank is merely the secured creditor and was not aware that the borrower would avoid returning the loan-amount. Prima facie, no case of moneylaundering is made out against bank. The bank has the priority rights on assets of the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created. The respondent no. 1 has merely brought the allegations made against the appellant which are to be decided by the Special Court. As far as issue of mortgage of property is concerned, the same has not been dealt by the respondent in accordance with the law. Therefore, I reject all the arguments alleged by the respondent no. 1 or its counsel. The property even could not have been attached in lieu of value thereof in view of the facts and circumstances of the case. As far as the allegation of the appellant on mortgage is concerned, the same is to be decided by the Special Court and this Tribunal does not wish to express any opinion about the outcome. As regards the tri-partite agreement, this Tribunal does not want to express any opinion with regard to the said agreement. Once the property is released from the attachment, it is for the Bank to decide the mode of recovery of the amount due. With regard to the attachment of the property is concerned, the attachment is not sustainable as the bank is mortgagee of the property and is entitled to recover the amount as per law. The entire impugned order passed by the adjudicating authority and the provisional attachment order is contrary to law and null and void. Both authorities have not followed the many judgements of Supreme Court and that various High Courts. The impugned order is wholly non-application of mind and noncompliance of mandatory provision and mechanical order has been passed. As per settled law, it is of the view that the respondent no. 1 and the Adjudicating Authority have failed to fulfil to comply the mandatory provisions. The impugned order even could be set-aside on this ground itself, however, during the course of hearing, counsel for the respondent no. 1 has correctly realized and agreed if the Bank of Baroda be impleaded as respondent no. 2 who was the main stakeholder of attached property in question - the impugned order is set-aside with regard to the property of the subject matter of the present appeal. The respondent no. 1 is enable to recover the amount as per law. The appellant cannot dispose of the property as the same is already mortgaged with the Bank.
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Service Tax
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2018 (11) TMI 1396
Voluntary Compliance Entitlement Scheme - correction sought in the erroneous declaration made in VCES-1 form to reduce the tax liability - eligibility of benefits u/s 108 of the Finance Act, 2013 - penalty - Held that:- The Assistant Commissioner does not dispute the Petitioner's assertions that not the tax of ₹ 4,73,527/, but sum of ₹ 3,40,686/was outstanding. The declaration included a payment of ₹ 1,32,841/previously made. If that was the case, the Assistant Commissioner ought to have considered the correct figure of tax dues. He could not have enforced the Petitioner's declaration which was factually erroneous. Even if the declaration required an amendment, the Petitioner had under his letter dated 27th December, 2013 brought the correct facts to the notice of the Departmental Authorities. Such letter could have been treated as a request for amending the declaration. Nothing is brought to our notice to suggest that such amendment application had to be filed in a particular format. Even if so, the same would be a purely procedural aspect. The authority shall therefore grant the benefit of the Voluntary Compliance Encouragement Scheme to the Petitioner - Petition allowed.
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2018 (11) TMI 1395
Refund of service tax paid on brokerage charges collected from the Foreign Institutional Investors - Unjust enrichment - assessee had paid service tax on the amount actually received on cum tax value - export of services - Held that:- The impugned order of the Tribunal, after holding on merits that, services rendered by the Respondent to the Foreign Institutional Investors were in the nature of export of services - further, in view of the proviso (a) to Section 11B (2) of the Act, no question of unjust enrichment can arise in case of export of services - the view taken by the Tribunal cannot be found fault with - the proposed question does not give rise to any substantial question of law - appeal dismissed.
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2018 (11) TMI 1394
Monetary limit of amount involved in the appeal - Held that:- It is seen that the appeals have been filed by the Revenue, which arose out of a common order passed by the Tribunal dated 12.7.2017. The Original Authority demanded service tax to the tune of ₹ 48,91,553/-. Thus, the monetary limit, involved in the instant case, being well below the amount fixed in the instruction dated 11.7.2018, the Department cannot pursue these appeals - appeal dismissed as withdrawn.
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2018 (11) TMI 1393
Appeal was dismissed for non-compliance of the conditional order - demise of the proprietor of the firm - whether demand be confirmed on the legal representatives of the proprietor? - ex-parte order - principles of natural justice. Held that:- It appears that the legal heir, who is presently the assessee in this appeal, viz., his spouse, did not have knowledge of the proceedings and consequently, the demise of the Proprietor of the appellant was not placed before the Tribunal. Further, the record shows that none appeared for the appellant when the Tribunal passed the interim order on 21.09.2016. Equally, when the appeal was dismissed for non-compliance of the conditional order, vide the impugned order, there was no appearance on behalf of the appellant - the peculiar facts and circumstances of the case warrant an order, which would grant some relief to the appellant. The matter is remanded to the Tribunal to decide the matter on merits and in accordance with law, without insisting upon pre-deposit - appeal allowed by way of remand.
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2018 (11) TMI 1392
Business Auxiliary Services - providing financial assistance to customers and receiving commission in connection with the promotion or marketing of service provided to the client - Held that:- M/s. Maruthi Udyog Ltd. are providing services of vehicle loans to the customers of the appellant which resulting in boosting the business of the company and recognition of the said assistance rendered by the appellant, the financial institution reciprocated with commission in some percentage of loan distributed through the appellant and this activity is a clear case of promotion of services rendered by the appellant which is specifically included in the category of BAS specified under Finance Act, 1994 and are liable to Service Tax w.e.f. 01.07.2003. Such promotion of business of financial help promoted the business of the appellant also and does not alter the character of BAS. This Tribunal in the case of City Honda [2017 (10) TMI 801 - CESTAT BANGALORE] have already considered this issue in detail and has come to the conclusion that the appellants are providing the services of “Business Auxiliary Service” and therefore, liable to pay Service Tax. Further CBEC Circular No. 87/05//2006-ST dated 06.11.2006 clarified that Service Tax will be payable by the dealer on the gross amount received from the Financial Company. The liability of Service Tax against the appellants is sustained - penalty dropped by invoking section 80 - appeal allowed in part.
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2018 (11) TMI 1391
Rent a cab service - Revenue has compared their balance sheet income with the value reported in the ST-3 returns and demanded duty on difference - benefit of abatement denied on the ground that they are not tour operators - Held that:- The appellants have not given any legal backing to the claim that the cars provided by them to other operator cannot be treated as rent a cab service provided by them to other operator. In the case of Trinity Travels [2016 (2) TMI 770 - CESTAT BANGALORE], relied by the appellant, it is seen that in that case, the assessee vehicle only used by another operator. In the said case, the only ground on which the demand was made was that the other operators who had used the cars of the appellant in the case for providing rent a cab service have not discharged the tax. In the instant case, however, the demand under rent a cab service is raised against the appellant themselves. Thus, the said case is not applicable to the facts in the instant case. Further, In view of the clarification of CBEC circular F. No. B-43/7/97/TRU, dated 11.07.1997, it is not open to Revenue to demand Service Tax in a situation where another rent a cab operator has paid service tax on same transaction. The appellant have produced certificates from other tour operators who have used their vehicles. These certificates cannot replace the evidence. The matter is remanded to examine the case in the light of CBEC circular F. No. B-43/7/97/TRU, dated 11.07.1997 - appeal allowed by way of remand.
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2018 (11) TMI 1390
Valuation - Industrial or Commercial Construction/ Work Contract Service - Management Maintenance and Repair Service - inclusion of value of free supply material provided by the service recipient in assessable value - Held that:- This issue has been finally settled by the Larger Bench in the case of Bhayana Builder [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] and which was upheld by Hon’ble Supreme Court in the case of Bhayana Builder Pvt. Ltd [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], where it was held that the material supplied free of cost by service recipient need not to be included in the gross value of service of Industrial or Construction Service/Work Contract Service. The Ld. Adjudicating Authority had no occasion to deal with this judgment. Therefore, the matter needs to be re-considered by the adjudicating authority in the light of the judgment in the case of Bhayana Builder - appeal allowed by way of remand.
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2018 (11) TMI 1389
Reverse charge mechanism - various services received from overseas - revenue neutrality - time limitation - Held that:- In respect of the Service Provided from the overseas the liability of payment of Service Tax is on the recipient of service in India, in terms of Rule, 2(1)(d)(iv) of Service Tax Rules, 1994 read with Section 66A of the Finance Act, 1994. Therefore, on merit the Service Tax liability is on the appellant. Time Limitation - Held that:- The demand amount of approximate 17.5 Lakhs is also available as a Cenvat Credit to the appellant, to that extent the Service Tax payment in cash will stand reduced. Therefore, this is a clear case of Revenue neutrality - the issue of Revenue neutrality has been considered in various judgments cited by the appellant in particular Larger Bench judgment in the case of JAY YUHSHIN LTD [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI], according to which if there is a case of Revenue Neutrality the longer period cannot be invoked. Penalty also set aside on account of absence of malafide intent on the part of appellant. The demand for the extended period is not sustainable, the same is set aside - If there is any amount of Service Tax arising in the normal period of limitation only that much amount is payable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1388
Valuation - renting of immovable property service - inclusion of reimbursement charges of ₹ 6,44,88,765/- from their client (tenants) towards electricity charges in addition to the rent amount in assessable value - Held that:- As against renting of immovable property the only rent collected by the appellant from their tenants is the consideration towards the rent. The electricity is consumed by the service recipient, therefore, they are liable to pay the same actual unless the same is included in the rent - In the facts of the present case, the electricity expenses is supposed to be borne by the tenants (service recipient), therefore, merely facilitating the payment of electricity charges by the appellant and subsequently taking the reimbursement of the same will not form part and parcel of gross value of service of renting of immovable property. The electricity charges reimbursed to the service provider by the service recipient not includible in gross value of renting of immovable property service. The decision in the case of M/S ICC REALITY (INDIA) PVT LTD OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE [2013 (12) TMI 854 - CESTAT MUMBAI] relied upon where it was held that Electricity charges collected from the tenants cannot be formed part of the assessable value for the purpose of service tax as provider of renting of immovable properties. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1387
Doctrine of dominant use - rule 3(a) of Service Tax (Determination of Value) Rules, 2006 - Revenue neutrality - Circular no. 93/04/2007-ST dated 10th May 2007 - Held that:- The appellant is, undoubtedly, aware of the scope of facility that is extended to its employees. They are equally aware that the revenues written off is a voluntary act of erasure on which the plea of liability to tax on receipt stands blunted. Had the appellant disclosed in their returns that there was no uncertainty on the non-recoverability of the amount decided in advance to be written off, the claim of disclosure could have been accepted. The penalty imposed under section 78 of Finance Act, 1994 is thus confirmed and, owing to the statutory exclusion of simultaneous imposition of penalty under section 76 of Finance Act, 1994 which, in the impugned order, is for a small portion of the demand, we set aside the other penalty. The impugned order is upheld.
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2018 (11) TMI 1386
Extended period of limitation - Business Auxiliary Services - certain amounts received from M/s Maruti Udyog Ltd. on account of extended warranty, true value service, bank commission and insurance commission - Held that:- In the case of City Motors & Financial Services [2011 (11) TMI 409 - CESTAT, NEW DELHI], it was observed that the issue was not clear from doubt and was interpreted by judicial forums in different ways. In such a situation extended period cannot be invoked for raising the demand. Inasmuch as in the present appeal the demand stand raised and confirmed by invoking longer period of limitation and by applying ratio of the above decision, such extended period was not available to the Revenue and accordingly demand is required to be held as barred by limitation. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 1385
Refund of CENVAT Credit on various input services - refund on the ground of time limitation - denial also on the ground that these services were not approved by the Development Commissioner - whether the refund application filed by the appellant in October, 2014 for the period ending October, 2013 should be treated as time barred in terms of the notification? - Held that:- The refund application was filed for the period ending October, 2013 and in view of the General Clauses Act, this month cannot be reckoned while calculating the period of one year. It has to begin from November, 2013 and ends in October, 2014. Therefore, the refund application has been filed within time limit and rejection of refund to the extent of ₹ 6,55,298/- on this account is incorrect and needs to be set aside. Even otherwise, the notification itself provides for extension of this time by the Asst. Commissioner/ Dy. Commissioner. Whether the appellant is entitled to refund of ₹ 8,80,140/- on account of services for which they had not permission of the Unit Approval Committee of the Development Commissioner? - Held that:- This approval being an essential requirement of the Exemption N/N. 12/2013-ST needs to be fully complied with if the appellant seeks to claim refund under the notification. There is nothing on record to show that the approval which is said to have not been obtained by the lower authority which fact has been reconfirmed by the first appellate authority has actually been obtained. Therefore, the refund on this account needs to be disallowed. The impugned order is modified to the extent that the amount of ₹ 8,80,140/- denied to the appellant on the account of limitation in filing the refund claim is set aside - Appeal disposed off.
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2018 (11) TMI 1384
Valuation - inclusion of terminal charges shown as the miscellaneous income and recovery of maintenance charges in their books of accounts - Held that:- The entire operation of transportation of the crude from Haldia port to BRPL is covered by a single contract. The terminal facilities are only intermediate operation of the transportation of the goods through pipeline. Since, the requisite amount of the service tax has already been paid on the service of transportation through pipeline provided by the respective parties, the terminal facilities being the integral part of the entire pipeline facilitating the transportation of the liquid crude, it will not be legally correct to consider the terminal facilities as independent facilities for which no real transaction of service charges have actually taken place and therefore demanding a service tax on the notional value taken by the appellant only for the purpose of accounting of the cost of the different units working under the appellants, will be not in the interest of the service tax law. Since, service tax has already been paid on the entire amounts which have been charged for transportation of the crude through pipeline, charging of service tax separately for the terminal facilities is legally not sustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1383
Valuation - inclusion of transaction charges collected by the appellant from their clients for providing stock broking services in connection with the sale or purchase of shares and securities - CENVAT Credit - duty paying documents. Inclusion of transaction charges - Held that:- The transaction charges recovered by the appellant from their respective clients is primarily statutory levy on the trading members and not on the clients of the trading members - if any of such charges which are primarily legal responsibility for payment with the appellant and same have been passed on to their clients, in case, same that will certainly form the part of gross value charged by them for providing taxable service. In this regard, the legal responsibility of the payment of transaction charges was of the trading members (in this case apparently the appellant) and as levy of transaction charges from the concerned stock exchange is on the appellant and since this liability have been passed on by him on their clients, the same need to be included in the taxable value as per the provision of Section 67 of the Finance Act, 1994. Accordingly, there is no merit in the appeal on this count and same is dismissed. CENVAT Credit - duty paying documents - Rule 9 (1) of the Cenvat Credit Rules - Held that:- Since the details contained in such documents has not been discussed either in the show cause notice or in the order-in-original it is very difficult to ascertain whether the documents on the strength of which appellants have availed the Cenvat credit fulfilled the requirement of details to be available as prescribed under proviso to Rule 9 (2) of the Cenvat Credit Rule or not - a substantive benefit cannot be denied to the appellant only for some procedural lapses and if all the requisite details are available on the documents on the strength of which Cenvat credit has been availed by them and as provided under proviso to Rule 9 (2) of the Cenvat Credit Rule, same cannot be denied to them legally - the department should verify the documents again on the strength of which the Cenvat credit has been availed by them and if such documents contained all the requisite details has been prescribed under proviso to Rule 9 (2) of the Cenvat Credit Rules the substantive benefit of Cenvat credit cannot be denied to them. Appeal dismissed in part and part matter on remand.
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2018 (11) TMI 1382
Classification of services - appellant desires to acquire license to manufacture products manufactured with the use of Timken (USA) s proprietary technical information and to service the products by using Timken (USA) s proprietary technical information - classified under Franchisee service or under intellectual property service - Time Limitation - Held that:- The agreement between the appellant and the Timken (USA) is not limited to use Timken s Intellectual Property i.e. proprietary technical information, knowhow etc. for manufacture of products and for service of the main products as is defined in the intellectual property service. Rather the various terms of the contract as given above indicate that the appellant has to represent the Timken (USA) to their various customers in such a way that the appellant looses its own individual identity and would perhaps be known only by the identity of Timken (USA). The services availed by the appellant are more akin to franchise services rather than intellectual property right service - the services availed by the appellant are franchise services and they need to pay service tax as applicable on the same. Time limitation - Held that:- As the assessee is working in the era of self-assessment and therefore the responsibility lies with them to classify the service availed/provided by them correctly and if any confusion or difficulty they are certainly free to approach the revenue authorities for necessary clarifications - the extended time proviso for demanding service tax has rightly been involved in their case. Appeal dismissed - decided against appellant.
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Central Excise
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2018 (11) TMI 1381
Classification of goods - Naptha - Revenue has sought to classify Naptha as “Other Special Boiling Point Spirits” under Chapter sub heading 2710.13 (prior to 01.03.2005) and under heading 2710 11 13 (after 01.03.2005) - whether Naphtha can be classified as a ‘motor spirit’? Held that:- Practically identical case has been decided by Tribunal in the case of Bharat Petroleum Corporation Ltd [2018 (4) TMI 829 - CESTAT MUMBAI]. In the said decision also the issue in dispute was whether Naphtha can be classified as a ‘motor spirit’. The evidence was a test reports undertaken that the temperature for 5% recovery by volume and the temperature be 90% recovery fell in the range prescribed for SBPS. However, in the said case, no test was done for the suitability of the use of the product either by itself or with any other substance as fuel in spark ignition engine. In this case, the said test has been conducted. To qualify as Motor spirit two very specific tests have to be followed, in respect of the testing for the possibilities of use in admixture with other substances "Motor Spirit‟ is concerned - In the instant case testing in admixture with any other substance other than mineral oil, has not been carried out, therefore, there is no evidence to hold that the product answers to description ‘Motor Spirits’ amd therefore, would be classifiable under heading 2710.14 (prior to 01.03.05) and heading 2710 11 13 (after 01.03.2005). Revenue has failed to establish that the product in question is classifiable as ‘Motor Spirit’ under the description of single dash heading of motor spirits (prior to 01.03.2005) and triple dash (after 01.03.2005) - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1380
Valuation - MRP based valuation or not - demand of duty on MRP basis on physician samples manufactured by the appellant on job work basis for other parties - imposition of penalties - Held that:- The issue is squarely covered by the decision of Tribunal in the case of SOFTSULE Pvt. Ltd [2018 (6) TMI 985 - CESTAT MUMBAI], where it was held that demand cannot be raised on the basis of MRP on such medicine - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1379
Demand of interest and penalty - the appellant had reversed the amount of cenvat credit of ₹ 1,02,678/- before issuance of the show cause notice - Held that:- Since sufficient balance was always lying in their cenvat account since the date of credit taken till the reversal of the same, the payment of interest is waived. Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that:- The Hon’ble High Court at Allahabad in the case of Commr. Of Cus. & C.Ex., Noida vs. Supreme Industries Ltd. [2016 (11) TMI 1289 - ALLAHABAD HIGH COURT] has held that neither any penalty nor interest under Section 11AC and under Section 11AB respectively was payable by assessee when it has deposited disputed duty voluntarily before issuing of notice under Sections 11AC and 11AB. The imposition of penalty under 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is set aside - payment of interest is also waived - appeal allowed in part.
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2018 (11) TMI 1378
Quantum of demand - appellant are claiming that there is some discrepancy in the demand confirmed to the tune of ₹ 2,28,032/-, whereas as per their calculation, the total demand should have been ₹ 1,55,768/- - Held that:- The issue is covered by the judgment of the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Belgaum vs. Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT]. In the aforesaid judgment the Hon’ble Supreme Court has held that w.e.f 01.04.2008, the cenvat credit is available only upto the place of removal. The demand of duty alongwith interest is upheld and since the dispute relates to interpretation of statutory provisions and there were diverse decisions of various High Courts and the matter has recently been stayed at rest by the Hon’ble Supreme Court, the imposition of penalty in the present case is not warranted - the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is set aside. Regarding the dispute of quantum of demand, the matter is remanded to the adjudicating authority to verify the documents of the assessee in respect of their claim and to pass an order in accordance with law - Appeal allowed in part.
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2018 (11) TMI 1377
Irregular availment of CENVAT Credit - the said credit was adjusted before issuance of the show cause notice - demand of interest and penalty - Held that:- There is no dispute regarding quantum of the credit availed and subsequently reversed by the assessee. They also paid the interest amounting to ₹ 18,552/- much before issuance of the SCN and the same finds mentioned in the show cause notice and has also been appropriated in the adjudication order. Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that:- The CENVAT credit taken by the appellant was reversed much before issuance of the SCN and the same has already been appropriated by the adjudicating authority. Though there is allegation in the show cause notice regarding suppression, but it has not been specifically explained in the show cause notice as well as in the adjudication order as to how the intent to evade payment of the Central Excise duty is established taking into consideration that the appellant is subjected to periodical audit by the department and the documents on the basis of which credit has been taken was available for inspection of the audit - penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is not attracted. The appeal is allowed.
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2018 (11) TMI 1376
CENVAT Credit - denial on the ground that the duty involved is not indicated in the relevant invoices, also on the ground that the name of the appellant itself does not figure in the invoice - credit of input services where SSI benefit availed - Held that:- Unless there is evidence on record that the input services corresponding to the disputed invoices (raised not in the name of the appellant but in the name of the appellant’s corporate office or in the name of some other entity) are used by the appellant, they cannot claim CENVAT credit. It is different from a case where the use of inputs/ input services is not in dispute and only the invoice indicates a wrong address but such is not the case. Denial of credit of ₹ 73,571/- on input services - contravention of the provisions of the Notification No.8/2003-CE dated 01.03.2003 - Held that:- As far as the exemption under N/N. 8/2003-CE is concerned, Para 2 (iii) clearly lays down the condition that no credit of CENVAT on inputs shall be availed. It places no such restriction on credit of “input services”, which is the point in dispute. Therefore, the demand raised seeking to deny credit on input services because they availed benefit of N/N. 8/2003-CE dated 01.03.2003 is not sustainable and the demand needs to be set aside. The confirmation of the demand upheld by invoking Rule 11 of CENVAT Credit Rules, 2004 [Transitional Provisions] which was not invoked in the SCN and thereby traveled beyond the SCN which is not sustainable. Appeal disposed off.
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2018 (11) TMI 1375
CENVAT Credit - Input services - service of Commission Agent - Business Auxiliary Services in respect of service tax charged by their Commission Agents for sales promotion of their products, which included procurement of orders for the appellant - CBEC Circular No. 943/4/2011-CX dated 29.04.2011 - Held that:- The credit is admissible on the ‘services of sale’ of dutiable goods on commission basis. The commission is payable only when the ‘services of sale’ of the dutiable goods are made through another person and not by self : what is clear from the above clarification is that it is the credit on ‘services of sale’ and not sale per se. The above referred CBEC Circular being clarificatory in nature, is retrospective in nature as no substantive change is brought in. The activities undertaken by such Commission Agent/broker would definitely fall under the ‘services of sale’ because of their responsibilities such as labour, promotion as also the settlement of disputes, if any, collection of dues in time, collection of duly receipted inspection notes, etc. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1374
Levy of Tea Cess - export of tea under bond under Rule 19 of the Central Excise Rules without payment of any duty - Department took the view that even for export under bond, cess as applicable was payable by the appellants - whether the appellants on export of tea are required to discharge Tea Cess which is otherwise leviable under Section 25 of the Tea Act, 1953? Held that:- The exemption extended to tea produced and exported by EOUs from levy and collection of Cess, the exemption was brought about by Notification dt. 1.9.2004 which was published in the Gazette of India Part-Ii Section 3 of 1st September 2004. In this regard, the exports by EOUs are on different footing from export goods under bond by manufacturer / assessees in the DTA. For the latter, during the period of dispute, erstwhile provisions of Rule 19 of Central Excise Rules, 2002 would be applicable. Hence for these reasons we are of the firm conclusion that the exemption granted to EOUs vide the above notification cannot be used in support of proposition that by implication export made by DTA units will be exigible to Cess. The Section 37B Order dt. 13.1.2006 clearly states that “Past instructions, Circulars and Orders on the issue may be considered as suitably modified” - there has been no instruction or order etc. issued earlier to 13.01.2006 to the effect that Tea Cess being duty of excise is required to be collected in respect of exports made by DTA units, such as the appellants. In any case, even if there had been any such instruction, that would obviously have got nullified by the said 37B order dated 13.01.2006. Tea Cess being collected as duty of excise as per Section 25 of the Tea Act, 1953, in view of Section 37B Order dt. 13.1.2006, cannot be collected in respect of exports under bond made by the appellants. The manner of preparation of tea and the process of manufacture of ‘instant tea powder’ cannot take away ‘instant tea” out of the definition of ‘tea’ under the Act, the Hon’ble Apex Court has held that the latter is also leviable for levy of cess under Section 25 of the said Act - post-Section 37B order, there should not be any doubt or confusion that cess under Section 25 of the Tea Act 1953 is not required to be paid in respect of exports under bond by DTA units, like the appellants. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1373
Forfeiture of the facility of utilizing the CENVAT credit as per Rule 8(3A) of Central Excise Rules - non-payment/short payment of duty - Held that:- The Division Bench of Delhi Tribunal in the case of GEI Industrial System Ltd. [2016 (11) TMI 227 - CESTAT NEW DELHI] after considering the various decisions of the High Courts and also the fact that the Supreme Court has granted a Stay Order in the case of Indsur Global Ltd., has come to the conclusion that the ratio adopted by the various High Courts and by the Tribunal in similar set of facts is still binding and has allowed the appeal of the assessee - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1372
Irregular availment of CENVAT Credit - 100% CENVAT credit on capital goods availed in the first year instead of 50% - credit was not utilized and was reversed - demand of interest and penalty - Held that:- On account of bona fide mistake, the appellants have taken 100% CENVAT credit in the first year whereas they were entitled to take CENVAT credit up to 50% but as soon as they realized their mistake, they reversed the 50% before the issuance of SCN - also, they had sufficient balance in their CENVAT credit account and therefore, they have not utilized the said CENVAT credit and it was merely a book entry. In the case of CCE vs. Bill Forge [2011 (4) TMI 969 - KARNATAKA HIGH COURT], the Hon'ble Karnataka High Court has held that if the credit was wrongly taken and not utilized and immediately reversed before the issuance of SCN, then the appellants are not required to pay interest and penalty. Demand of Interest and penalty not sustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1371
CENVAT Credit - various input services - Electrical Services - Renting of Immovable Property Services - services of Air Travel Agent and Boarding and Lodging - Manpower Supply Services. Electrical Services - Held that:- The issue is no more res integra as the same has been decided by the decision of the Mumbai Bench of the Tribunal relied on by the Ld. Advocate in the cases of Ultratech Cement Ltd. [2016 (12) TMI 381 - CESTAT HYDERABAD] for two different periods, wherein the Tribunal has allowed the Credit on input services like construction, erection, installation and maintenance and repairs, etc - credit allowed. Renting of Immovable Property Services - Held that:- The Commissioner (Appeals) has rightly held that where the rent is paid for a place outside the factory premises, there was “no question of allowing CENVAT Credit” for the same - credit cannot be allowed. Services of Air Travel Agent and Boarding and Lodging - Held that:- The Ld. Advocate is not pressing the same. Therefore, the disallowance of Credit on these two services is also upheld. Manpower Supply Services - Held that:- Reliance placed in the case of M/s. Coastal Rubber Equipment Pvt. Ltd. Vs. C.C.E., Chennai-II & vice versa [2017 (10) TMI 840 - CESTAT CHENNAI], where it was held that Admittedly, services received by the appellant are ‘Security and Man-power Supply Services’. As such, whatever tax has been paid on the said services is available as a credit to the service recipient - credit allowed. Appeal allowed in part.
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2018 (11) TMI 1370
Recovery u/s 153 of the Finance Act, 2003 - Department entertained the view that in pursuance of retrospective amendment through Notification Nos.32/99 & 33/99 both dated 08.07.1999 must not be adjusted from Cenvat Credit Account - Held that:- The Hon’ble High Court in the case of M/s Eminent Health Care and Cosmetics Pvt. Ltd. and Others Vs. UOI [2006 (9) TMI 597 - GAUHATI HIGH COURT], upheld the retrospective amendment and also held that the petitioners were required to pay back the refund granted to them in excess. Therefore, the excess amount of refund availed by the appellants are required to be recovered by the Department. In this case, only one product was manufactured by the appellant and even if, the refund was to be granted through PLA account, the same would have been available by way of cenvat credit to the respondents making situation revenue neutral. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 1369
Refund of accumulated CENVAT Credit - export of goods - Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- The Hon’ble Madras High Court in its judgement in COMMISSIONER VERSUS BALA HANDLOOMS EXPORTS CO. LTD. [2015 (10) TMI 694 - MADRAS HIGH COURT] has recorded a finding after recording a subsequent development in the nature of an Order dated 26.03.2008 passed by the Assistant Commissioner of Central Excise; in that Order, the Assistant Commissioner had granted refund of ₹ 12,15,461/-. Thus, The Hon’ble High Court was pleased to record that the concerned appeals would become infructuous and consequently, the same were dismissed. It is an admitted position that both the assessee as well as the Revenue had accepted the above verdict of the Hon’ble Madras High Court without any further challenge and thus the finding having become final, the same requires strict adherence by the Revenue - the Revenue is not justified in its action of rejecting the refund claim with the admitted position of it having accepted the Hon’ble High Court’s directions, more so since it appears to me that ‘challenge in the manner known to law’ does not call for any shortcuts as has been done in the case on hand - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1368
CENVAT Credit - inputs services - service tax paid on telephone bills which was in the name of their President - Manpower Supply utilized for staff canteen - Held that:- This Bench of the Tribunal in the case of M/s. IP Rings Ltd. Vs. Commissioner of Central Tax, GST & CE, Chennai Outer [2018 (9) TMI 898 - CESTAT CHENNAI] wherein, Manpower Supply Services used for housekeeping and canteen being integrally connected to the manufacturing activity, were held to be eligible input services. There being no change with regard to facts the above ruling squarely applies to this case vis-à-vis the present case on hand. Moreover, the Revenue was unable to produce any Orders/judgements contrary to or distinguishing the above Order of this Bench - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1367
CENVAT Credit - TMT Bars/Rods/Angles falling under Chapter 72 and 73 which are used in the power generation Co-Gen plant set up by the appellants in their factory - Held that:- The part of the power generated is utilized by the appellants and part of it is transmitted to KPTCL. This Bench in the case of Nizam Deccan Sugars Ltd. [2008 (2) TMI 162 - CESTAT, BANGALORE] held that capital goods used in Go-Gen power plants for generation of electricity part of which is used by the manufacturers of final product and part of it is sold to power distribution companies are admissible for credit. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1366
Clandestine removal - alleged shortage of inputs formed a part of the excess found in the Incoming Warehouse - the allegation of the Revenue was that the inputs were found short on which the CENVAT Credit of ₹ 2,35,943/- which was availed, was liable for recovery and also an amount of ₹ 11,80,169/- being the CENVAT on the alleged shortage with regard to the finished goods. Held that:- The lower authorities have not given any finding on the factual contentions urged as also the pleading of the Ld. Advocate with regard to the difference in SAP value and physical value and nothing else - the lower authorities should consider the above facts and then give a proper finding before arriving at any shortage in terms of either inputs or finished goods, for which reason the matter remanded back to the file of the adjudicating authority for passing a de novo adjudication Order after considering the contentions of the appellant and also the case-law that the assessee/appellant may rely on. Penalty u/s 11AC - Held that:- The appellant had lost the documents due to floods/natural calamity coupled with the fact that no suppression could be attributed to the appellant, no penalty could be levied under Section 11AC of the Act. Appeal allowed in part.
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2018 (11) TMI 1365
Refund claim - time limitation - case of appellant is that refund claim is hit by time-bar since the relevant date is 31.3.2015 on which date the last installment was paid by the appellant during the period of investigation - Held that:- The duty has been determined by the adjudicating authority by order dated 6.1.2017 only. The appellant has come to know that he has paid excess duty only on such date. Therefore, the refund claim filed in February 2017 is well within the time and the contention of the department that the date of payment of last installment should be the relevant date is without any merits - refund allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1364
Classification of goods - body built on duty paid chassis - Whether classified under CETH 87.02 or under CETH 87.07 of Central Excise Tariff? - Held that:- The present appeal requires to be remanded to the adjudicating authority for De novo consideration basing upon the outcome of the decision of the Apex Court in the appellant’s own case for the earlier period which is sub-judice - appeal is allowed by way of remand to the original authority.
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2018 (11) TMI 1363
MODVAT/CENVAT Credit - Waste - part of RPG was also being cleared on payment of nil rate of duty - Rule 57C of CCR - Held that:- The issue is decided in the case of COMMR. OF C. EX. & CUS., AURANGABAD VERSUS COSMO FILMS LTD. [2014 (12) TMI 315 - CESTAT MUMBAI], where it was held that Rule 57D, as it stood at the relevant time, clearly laid down that credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse or by-product arising during the manufacture of final product, whether or not such waste, refused or by-product is exempted from whole of the duty of excise thereon or is chargeable to nil rate of duty or is specified as a final product under Rule 57A. The waste and scrap of plastic emerges as the by-product and not as a final product - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1362
Valuation - inclusion of excess amount alleged to have been recovered from the buyer than the actual freight incurred in the accessable value - Held that:- It has been held in the case of INDIAN OXYGEN LTD. VERSUS COLLECTOR OF CE [1988 (7) TMI 58 - SUPREME COURT OF INDIA] by the Hon’ble Supreme Court that even if the excess amount is released on the account of freight from the buyers it cannot be part of the excessable value under Rule 5 of CVR-2000. The excess amount of freight realized is not required to be added for the purpose of computation of excisable value for the payment of Central Excise duty - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1361
Refund of CENVAT Credit - time limitation for filing appeal - Section 11B of Central Excise Act, read with Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- The Commissioner (Appeals) has decided the issue relying on the decision in case of Deepak Spiner Ltd Vs. CCE, [2013 (11) TMI 1221 - CESTAT NEW DELHI] which is again based on the hon’ble High court of MPs order in case of STI India Vs CCE [2008 (10) TMI 246 - HIGH COURT OF MADHYA PRADESH AT INDORE], where it was held that the time limit as prescribed under Section 11 B is not applicable in the case of refund of unutilised Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The time limit as prescribed in section 11B of Central Excise Act shall not be applicable in the case at hand - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2018 (11) TMI 1360
Mining Services - C-Forms - concession for the HSD - whether quarrying can act as mining ? - benefits under Section 8 of the CST Act - whether the fuel it uses for its machinery and vehicles qualifies for that benefit? Held that:- The Court analysed, among other things, Section 8 of the CST Act. It has held that the locomotives and motor-vehicles are used by the petitioner after the mining operations were concluded and before the manufacturing process commenced, and also to carry the finished products. The Company uses HSD oil as its fuel in its quarrying operations. With that fuel it runs its machinery and also its motor vehicles - In Indian Copper Corporation Ltd. [1964 (10) TMI 41 - SUPREME COURT OF INDIA], the Supreme Court has discussed thread bear the legislative nuances of Section 8, especially Section 8(3)(b), of the CST Act - Their Lordships have held that if a dealer is engaged both in mining operations and the manufacturing process-the two processes being interdependent-it would be impossible to exclude vehicles used for removing the mined (here'quarried') material from the place of operation to other places. Petition allowed - the respondents is directed to permit the petitioner Company to have access to the on-line facility- KVATIS- so it can download the necessary C-forms - petition disposed off.
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2018 (11) TMI 1359
Deputation of officers at distillery unit - reimbursement of medical expenses would be included as cost of establishment - specific contention raised by the State Attorney is that the cost of establishment would also include the medical reimbursement under the Medical Attendant Rules - Held that:- In the present case, merely for the unfortunate circumstance of the father of a person who was deputed to the distillery fell sick during the period of deputation; the distillery cannot be mulcted with the treatment expenses. The reimbursement of medical expenses as available in the Medical Attendant Rules is another incidence of service, which would not come within the meaning of cost of establishment as such nor as understood in Rule 14 - we have to find that the medical benefits as spoken of in Exhibit P1 would be confined to that incurred by the deputed employee himself, that too any expenses incurred by way of an employment injury in the distillery and not otherwise. What would be the position in the event of the deputationist himself falling sick, not as a direct result of employment; and being unable to attend duty for a period of one or two months? - Held that:- Definitely there would have to be another deputation made and there could be no claim of medical reimbursement made from the distillery. The benefit of medical reimbursement is an incidence of the total service of the employee with the Government and is not a benefit which accrues during the period of deputation - we find the reasoning of the learned Single Judge to be perfectly in order and the Rules do not persuade us to arrive at a different finding. It is deemed fit that the appellant be returned the amounts with 8% interest from the date of deposit till payment. The refund as directed shall be made within a period of three months - appeal dismissed.
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2018 (11) TMI 1358
Rejection of the claim of inter-state purchases on commission basis - issuance of Form-H - Whether the Tribunal has erred in rejecting the claim of interstate purchase of wheat (made on commission basis) on extraneous material and application of wrong principle? Held that:- In the first place, the absence of the export order placed on the ex-U.P. Principal, was wholly irrelevant and extraneous for the purpose of the adjudication of the present case. Insofar as the absence of the purchase order is concerned, learned counsel for the assessee submits that the same was admittedly on record and the Tribunal has erroneously recorded a finding that the purchase order was not made available to the farmers/unregistered dealers. As to the point whether the details in the "Satti Bahi" is otherwise complete, the fact that the books of account of the assessee has been accepted and the further fact that there is no specific finding recorded as to any defect in the books of account of the assessee, that point has to be treated as one decided in favour of the assessee. As to the first issue being whether the names of the farmers were recorded with all details and its impact, it has only to be stated to be accepted that once it was admitted that the assessee had made purchases from unregistered dealers/farmers, Form-H - Held that:- Though it is true that a claim of the export sale cannot co-exist with the claim of interstate purchase of wheat on commission basis, both claims arising in the hands of the same assessee, however, it is to be seen whether the nature of transaction performed by the parties would get altered or determined solely upon issuance of Form- H - If the evidence was found to be unbelievable or false or wrong or doubtful, that issue may have been further examined in the context of Form-H. Even in that regard, it may remain relevant to consider whether the Ex-U.P. Principal/Exporter has been examined by the assessing officer - the Tribunal has misdirected itself while considering the claim raised by the assessee. Revision allowed - The matter is remitted to the Tribunal to pass a fresh order strictly in accordance with law.
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2018 (11) TMI 1357
Validity of assessment order - TNVAT Act - challenge to the said assessment order before the Writ Court was on the ground that the pre-assessment notice was not validly served on the appellant as per Rule 19 of the Tamil Nadu Value Added Tax Rules, 2007 - Held that:- There is no error in the finding rendered by the Writ Court, since the duty of the Department is to serve notice on the dealer in terms of the said Rules, which has been done in the instant case. The assessment pertains to the year 2012-13 and that the revision of assessment was completed on 06.3.2015 - The assessment order remains a paper order, since the Department has been dragged into litigation. Apart from that, the specific plea of the appellant is that they are entitled for exemption in terms of Entry 80 under Part B of the Fourth Schedule to the TNVAT Act. Appeal allowed - the Writ Court is modified by directing the appellant to treat the assessment order dated 06.3.2015 as a show cause notice and submit their objections within a period of 15 days from the date of receipt of a copy of this judgment - appeal allowed by way of remand.
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2018 (11) TMI 1356
Imposition of compounding fees on offences - interpretation of statute - Compounding of Offence - Section 74 of the KVAT Act, 2003 - Held that:- Giving a purposive interpretation to the amendment, it has to be understood as enhancing the limit in the body of the sub-section, which includes the sub-clauses and the proviso also - Hence we cannot accept the contention that in the year 2009 when the amendment was made, the proviso was retained as having a maximum limit of ₹ 2 lakhs. As to the amendment made in 2011, the legislature was more careful in prescribing that the enhancement would be made at every place where the earlier limit had been specified. The assessee had paid up the compounding fees at ₹ 8 lakhs and had approached this Court claiming relief - The learned Single Judge refused to consider the same, since already the petitioner had paid up the compounding fees without demur. Appeal dismissed - decided against appellant.
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2018 (11) TMI 1355
Time Limitation - proceedings initiated u/s 67 of the KVAT Act, 2003 challenged on the ground of the orders passed being vitiated on the ground of period of limitation having expired - Held that:- The order now issued against the purchasing dealers impugned in the writ petitions are dated 18.03.2017; within the limitation period. It is within the five year reasonable time decalred by us, if the statute does not provide for a specific period of limitation to operate. The summons issued in 2012-13 to a number of dealers, and verification of the records produced by all of them culminated in the detection of offence on 30.09.2014. The delay in detection by issuance of notice, to the selling dealer has been explained which we have found to be satisfactory. The period of three years hence commences from the date of issuance of notice to the selling dealer. The order against the purchasing dealers is passed within the period provided of limitation. The argument that notices to the purchasing dealers were delayed and was not proximate to the verification of their records, has no legs to stand since the proceedings were finalised within three years from 30.09.2014 - the petitioners would have to be relegated to the statutory remedy. The petitioners would be entitled to file appeals under the statute within 30 days from the date of receipt of a certified copy of this judgment - petition disposed off.
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2018 (11) TMI 1354
Exemption form sales tax - sales effected from the Customs Bonded Warehouses - sales in the course of import or not - Whether the Tribunal was justified in holding the assessee eligible for exemption under Section 5(2) of the Central Sales Tax Act, 1956? Held that:- There is no doubt that in the instant case the furnace oil was imported in both the relevant years, sold to exempted units and the remaining sold to purchasers who filed Bills Of Entry for home consumption and cleared the goods through the customs frontiers. The Bill of Entry for home consumption was entertained by the Customs Authorities on the basis of the agreements and the invoices raised by the importer. The documents having evidenced the sale before the import was completed and the transfer of title to the goods; there cannot be any tax levied on the transaction as one carried out in the State. The Assessing Officer had granted exemption only to the sale effected by the assessee to the units in SEZ against Form 43 and the rest of the sale was not granted exemption under Section 5(2) of the Act, which according to us was not appropriate - revision dismissed - decided against Revenue.
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Indian Laws
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2018 (11) TMI 1397
Closure of proceedings - dishonor of cheque - whether the provisions of Section 258 Cr.P.C. for stopping all the proceedings are applicable to the proceedings initiated under Section 138 of the N. I. Act? Held that:- Obviously it is only when the cheque amount with interest and cost as assessed paid by a specific date, the Court is entitled to close the proceedings in exercise of its power under Section 143 of the Act read with Section 258 Cr.P.C. and thereafter discharge the accused and not beyond that. It is not the Section but only the principles of Section 258 Cr.P.C. that have been held to be applicable to complaint cases that too only to the extent as enunciated by the Hon’ble Supreme Court in Meters and Instruments’ case [2017 (10) TMI 218 - SUPREME COURT OF INDIA]. Petition dismissed - decided against petitioner.
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