TMI Tax Updates - e-Newsletter
November 6, 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

• The activity of production and growing of said specialized seeds in the leased land is a agricultural activity - Not liable to Income Tax

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• Composite Supply - Supply of medicines, consumables and implants to in-patients are eligible for exemption as part of health care services

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Articles

• INSTANT NOODLES: INSTANT PROFITS

News

• Jaitley: Fair and Transparent Public Procurement will protect the revenues of the State and make sure that they are used for optimal purpose

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• XV Finance Commission holds productive discussion with Smt. Sushma Swaraj, Minister of External Affairs and other officials

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• India’s country pavilion at CIIE in Shanghai showcases India’s strength

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• CCI to hold national conference on public procurement & competition law today in Delhi

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Notifications

GST

• 61/2018 - dated 5-11-2018 - CGST
  TDS under GST - public sector undertaking - supply from one PSU to another PSU exempted from applicability of provisions relating to TDS

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GST - States

• S.O. No. 79-54/2018-State Tax - dated 1-11-2018 - Jharkhand SGST
  The Jharkhand Goods and Services Tax (Twelfth Amendment) Rules, 2018.

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• S.O. No. 78-53/2018-State Tax - dated 1-11-2018 - Jharkhand SGST
  The Jharkhand Goods and Services Tax (Eleventh Amendment) Rules, 2018.

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• S.O. No. 77-52/2018-State Tax - dated 24-10-2018 - Jharkhand SGST
  Notifies that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of half per cent. of the net value of intra-State taxable supplies.

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• 13/2018-State Tax - dated 17-9-2018 - Kerala SGST
  Amendments in Notification Number 7/2018-State Tax dated the 13th August, 2018.

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• 12/2018-State Tax - dated 17-9-2018 - Kerala SGST
  Amendments in the Notification number 9/2017-State Tax dated the 4th October, 2017 and Notification number 1/2018-State Tax dated the 6th April, 2018.

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• 11/2018-State Tax - dated 17-9-2018 - Kerala SGST
  Amendments in notification number 16/2017-State Tax dated the 23rd November, 2017.

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• 10/2018-State Tax - dated 17-9-2018 - Kerala SGST
  Amendments in Notification Number 3/2017-State Tax dated the 31st August, 2017.

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• F.A-3-32-2018-1-V-(83) - dated 29-9-2018 - Madhya Pradesh SGST
  Appoints the 1st day of October, 2018, as the date on which the provisions of section 52 of the said Act shall come into force.

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• F.A-3-31-2018-1-V-(84) - dated 29-9-2018 - Madhya Pradesh SGST
  The Madhya Pradesh Goods and Services Tax Rules, (Amendment) 2017,

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• F.A-3-28-2018-1-V-(86) - dated 29-9-2018 - Madhya Pradesh SGST
  Amendments in this department's Notification No. FA-3-28-2018-1-V (76), Bhopal dated 30th August, 2018

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• F.A-3-27-2018-1-V-(85) - dated 29-9-2018 - Madhya Pradesh SGST
  Notifies the registered persons having aggregate turnover of up to 1.5 crore rupees furnishing the details of outward supply of goods or services or both.

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• F.A-3-12-2018-1-V-(87) - dated 29-9-2018 - Madhya Pradesh SGST
  Amendments in the Notification No. F A-3-55-2017-1-V (103), dated the 15th September, 2017; and notification No. F A-3-12-2018-1-V (34), dated the 24th March, 2018.

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• F-A-3-82-2017-1-V-(81) - dated 29-9-2018 - Madhya Pradesh SGST
  Amendments in the Notification No. FA-3-55-2017-1-V (87), Bhopal dated 11th August 2017; and Notification No. FA-3-82-2017-1-V (155), Bhopal dated 15th November, 2017.

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• F-A-3-63-2018-1-V-(82) - dated 29-9-2018 - Madhya Pradesh SGST
  Set up by an Act of Parliament or a State Legislature

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• F-A-3-42-2017-1-V-(89) - dated 29-9-2018 - Madhya Pradesh SGST
  Clarifying the Scope and Applicability of this department's notification No. F A-3-42-2017-1-V (53), Bhopal, dated 30 June, 2017.

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• F-A-3-36-2018-1-V-(90) - dated 29-9-2018 - Madhya Pradesh SGST
  Notifies that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of half per cent of the net value of intra-State taxable supplies.

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• F-A-3-33-2018-1-V-(88) - dated 29-9-2018 - Madhya Pradesh SGST
  The Madhya Pradesh Goods and Services Tax Rules, (Amendment) 2017

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• F.A-3-30-2018-1-V-(78) - dated 20-9-2018 - Madhya Pradesh SGST
  Waives the late fee payable FORM GSTR-3B, FORM GSTR-4, FORM GSTR-6.

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• F.A-3-29-2018-1-V-(79) - dated 20-9-2018 - Madhya Pradesh SGST
  The Madhya Pradesh Goods and Services Tax Rules, (Amendment), 2017

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Circulars / Instructions / Orders

GST - States

• 3578/GST-2 - dated 2-11-2018
  Regarding applications of GST Practitioners.

DGFT

• 44/2015-2020 - dated 5-11-2018
  Amendment of Appendix - 2T of Appendices and Aayat Niryat Forms of Foreign Trade Policy, 2015-20 - reg.

Highlights / Catch Notes

GST

• TDS under GST - public sector undertaking - supply from one PSU to another PSU exempted from applicability of provisions relating to TDS
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• The quit rent / lease rent paid to Kerala Government on the land used for agricultural purpose ie, Coffee Plantation be classified under HSN 9986 and eligible for exemption under GST.
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• ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota’ classified under Schedule III of GST Laws, vide Heading 2106 ‘Food preparations not elsewhere specified or included’ and is taxable @18% GST
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• The supply of medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.
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• Recovery of GST dues from the debtors - extreme financial hardship - the revenue shall not compel ONGC or any other debtor of the petitioner to deposit any amount with the department or prevent the debtor from paying such sum to the petitioner.
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Income Tax

• Assessee is not entitled to deduction of any provision created for bad and doubtful debts, no matter such provision is created based on the prevalent accounting policies - Explanation to section 36(1)(vii), which prohibits granting of deduction of any provision for bad and doubtful debts.
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• Trasfer pricing - CIT(A) granted the benefit of ±5% without any standard deduction - In view of legislative amendment carried out retrospectively, the assessee cannot claim any standard deduction.
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• Agricultural activity or not - production of specialized seeds in the leased lands, (1) making of certified seeds; (2) undertaking other processing activities and finally (3) trading of the said certified seeds - the entire activity of production and growing of said seeds becomes an agricultural activity.
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• Registration to the assessee u/s 12AA - ITAT allowed registration without considering the observation of the CIT - expenses incurred by the trust are not in consonance with the objects of the trust - non-speaking order passed by the tribunal - matter restored before CIT(E)
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• Validity of reopening of assessment - The doctrine of merger would have no application in the present case as the subsequent order was held to be unsustainable in law - where the reassessment order was annulled, the original assessment order would automatically get restored.
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Customs

• Classification - Helium Leak Testing Machine - the machine is used for detecting leakage and not for the purpose of measuring or checking the flow, level, pressure or other variables of liquids or gases - to be classified under heading 9031 49 00 - not eligible for exemption.
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• The right to prefer an appeal to the Tribunal under Sec. 129A of the Customs Act, 1962 against an order passed under Regulation 21 or 23 is available only to the CHA - Revenue’s appeal dismissed as not maintainable.
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• Classification of vessel - the vessel imported was fitted with cranes - appellants had knowingly adopted the description to suit their convenience and classify the goods under heading 8901 so that they can avail the benefit of exemption. It was part of a well thought out strategy to evade duty of Customs.
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• Role of CHA in duty evasion - vicarious liability - The entitlement to do the business of CHA is to be tested in a proceedings under Regulation 22 of CHALR, 2014. And Regulation 21 cannot be used as a tool to prevent the CHA from doing business.
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• Cancellation of the CHA Licence - violation of Regulation 14(d) of the CHALR, 1984 - The Tribunal has taken a view that the Customs Officer would in any event have scrutinized the compliance or otherwise of the documents filed before them before the consignments were cleared - CHA cannot be held guilty.
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Indian Laws

• Dishonor of Cheque - offense u/s 138 - Since issuance of cheque by the accused and his signature therein are admitted by the accused and the complainant has proved his case by way of preponderance of evidence, the lower appellate Court went wrong in setting aside the judgment of the trial Court.
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Service Tax

• Valuation - Commercial or Industrial Construction Services - inclusion of FOC material while claiming abatement of 67% - The adjudicating authority has committed an error while interpreting the provisions qua valuation of the taxable service
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• Valuation - inclusion - there is no justification for including the value of free supplied materials while determining the gross amount charged for the purpose of benefit of Notification No.15/04-ST ibid as amended
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• Demand of service tax - Whether the adjustment of VAT paid on sale of SIM to its consumers is allowed? - the tribunal being creature of the Central Act, would not be in position to determine such transfer and adjustment of VAT paid under State Act, towards the tax liability under a Central Act.
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• Levy of service tax or VAT/Sales tax - supply of SIM card - The supply of SIM cards is integral with provision of the taxable service and without the said SIM cards the provisioning of this taxable service is impossible - benefit of N/N. 12/2003-ST cannot be extended to appellant.
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• GTA service or not - there is nothing asserting that no consignment notes were issued in this particular case. Therefore, there is no reason to hold that service tax on GTA services is not payable in this case.
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• CENVAT Credit - trading activity - the explanation appended to clause 2(e) of the Cenvat Credit Rules 2004 are mere clarificatory in nature since definition of service as contained in 65B(44) and exempted service in 66D are to be read conjointly and not in exclusion of each other - trading activity cannot be called a service to deny the credit under Rule 6 of Cenvat Credit Rules.
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Central Excise

• Valuation - goods cleared from the factory but sold through consignment agents - there is no need to determine the assessable value on the basis of price at which the goods may be sold subsequent to the time of removal of goods
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• Penalty u/r 25 of CER - the Tribunal while passing the impugned order did not give any reason as to why the penalty of ₹ 5,00,000/- should be confirmed - Penalty set aside
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• CENVAT Credit - Captive consumption - clearances to Mega Power Project - the exemption for captive consumption of intermediate products has been correctly claimed by the appellant in the present case
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• Liability of Interest - reversal of credit before utilization - As per the amended Rule 14 w.e.f. 01.03.2015, the interest is chargeable for the act of wrong availment of credit only when the assessee wrongly availed and utilized the cenvat credit
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Case Laws:

• GST

• 2018 (11) TMI 283
  Levy of GST on profit earned - supply or not - beer bearing brand/s owned by the Appellant manufactured by Contract Brewing Units out of the raw materials, packaging materials, and other input materials procured by it and accounted by it and thereafter selling such beer to various parties under its invoicing - liability of GST on Brand Owner on the “Surplus Profit” transferred by the CBU to Brand Owner our of such manufacturing activity. Whether manufacture of beer (bearing brand owned by the Appellant) by the CBUs under its invoicing would be considered as a supply of service and whether GST is payable by the CBUs on the profit earned out of such manufacturing and supply of beer? - Held that:- The Authority ruled that the activity undertaken by the CBUs is not in the nature of job-work, and hence no GST is payable. The ruling on this aspect has been accepted by the Appellant and is not challenged in this appeal. Whether GST is payable by the brand owner on the ‘surplus profit’ transferred by the CBU to the Brand Owner out of such manufacturing activity? - whether this amount which is transferred can be considered as supply or not? - Held that:- The levy clearly excludes the supply of alcoholic liquor for human consumption. The CBUs clearly make and supply alcoholic liquor (beer, in this case) for human consumption, and the same is excluded from the purview of GST - It is also clear that the CBUs collect a consideration/ payment for the supply of the product (beer) made by them to the Beverages Corporation/State regulated depots or to the Wholesalers / Indenters holding necessary permits / licences under the relevant Excise laws of the State concerned. The beer is made by the CBUs under a contractual agreement with the Appellant - Out of these goods and services that the CBUs spend on, many are exigible to GST levies as they may apply - there being no general exemption being available under GST, to such raw materials/ services that are used in making the alcoholic liquor for human consumption. The income so had from CBU operations are then partially disposed of by being charged as the expenses and the profit for CBU and as the payments for use of brand name etc. The remaining amounts which represent the sales turnover or income from the sale of beer (termed as surplus profits by the Appellant) are transferred to the Appellant. For providing the brewer the representational right to make and supply beer under their brand, the Appellant receives from the brewer a Brand fee of ₹ 5 per case. In addition, the Appellant also receives an amount which in terms of clause 8 of the Agreement, is termed as “reimbursement of expenses incurred by the brand owner”. This amount is not fixed but is variable depending on the sales in a particular month, the adjustment from the sale proceeds towards the variable costs incurred by the brewer, the brewer’s profit and the brand fee paid by the Brewer to the Appellant. The surplus remaining after this, if any (denoted as W in the Agreement), is transferred to the Appellant’s account - It is evident that the Appellant receives two kinds of amount from the Brewer in terms of the Agreement: One is the Brand Fee which is fixed at ₹ 5 per case, and The other is the variable component ‘W’ which is the surplus amount remaining in balance after the sale proceeds have been apportioned towards the brewer’s operational costs and brand fee. Whether, GST is payable on both the amounts received by UBL i.e Brand Fee of ₹ 5/- per case and on the Component ‘W’? - Held that:- It is evident that, the Appellant has provided a service to the Brewer by way of granting him the know-how to manufacture the beer according to their specified standards and has also provided the Brewer with adequate personnel to supervise its manufacture, packing and sale. This service has been rendered by the Appellant in the course of his business. As per the terms of the Agreement, the Brewer pays a consideration to the Appellant in return for the latter granting the representational right to use its Trademarks and labels in the manufacture and supply of beer by the Brewer. Hence, the activity rendered by the Appellant to the Brewer is a service which has been undertaken by the Appellant in the course of his business under an agreement and for which, in terms of the agreement, he gets a consideration. As such, the activity performed by the Appellant in terms of the agreement can be termed as a ‘supply’ under Section 7 of the CGST Act. In the GST law, by virtue of clause 5(c) of Schedule II, the act of temporarily transferring any intellectual property right or permitting the use of or enjoyment of any intellectual property right has been categorised as a supply of service. In the instant case, the Appellant has permitted the CBUs to use the trademarks Owned by it, permitted the Brewer to acquire the know-how relating to the production and packaging of UBL’s beer, which is the sole property of UBL and has permitted the Brewer to use the Labels for branding of beer for sale by the Brewer. All these amount to permitting the Brewer to use intellectual property rights. Therefore, by virtue of clause 5(c) of Schedule II of the CGST Act, the said activity amounts to a supply of service - the activity of the Appellant undertaken with contracting units in terms of the Agreements are in the nature of permitting the use of intellectual property right and hence is squarely covered under clause 5(c) of Schedule II of the Act. Reimbursed expenses received by the Appellant - Held that:- This expenditure incurred is in connection with according the representational rights for the manufacture and sale of branded beer to the CBU - the component ‘W’ also forms a part of the consideration received by the Appellant for supply of service. This component ‘W’ therefore, is also liable to GST being a consideration for the supply oftaxable service. The grant of representational right to the Brewer and the receipt of the consideration in the form Of Brand Fee and reimbursed expenses, are all undertaken in the course of the business of the Appellant. Therefore, all the parameters of ‘supply’ as defined in Section 7 of the CGST Act are duly satisfied and therefore, the entire amount i.e Brand Fee as well as the reimbursed expenses, received by the Appellant as a consideration for the supply of service is chargeable to GST. Classification of the service - Held that:- The framework of the Service Tariff Codes under GST still provides a possible solution by categorising such services under Service Code 99979 as “Other Miscellaneous Services’. The sub-heading under this service code is 999799 which is “other services nowhere else classified’. The GST applicable under this category of service is 18%. Ruling:- The activity engaged in by the Appellant by way of granting the contracting brewing units the representational right to manufacture and supply beer bearing its brand name, in return for a consideration, is a supply of service as mandated in Section 7 of the CGST Act read with clause 5(c) of the Schedule II of the said Act. The supply of service by the Appellant is taxable to GST in terms of Section 9 of the CGST Act. The service supplied by the Appellant is classified under the Service Code 999799 as “other services nowhere else classified”. The amounts received by the Appellant from the contracting units under the Agreement, in the nature of Brand Fee and reimbursement of expenses, is termed as a consideration for the supply of service and is chargeable to GST at the applicable rate of 18%.

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• 2018 (11) TMI 282
  Rate of tax - Marine propellers, Rudder set, Stern tube set, Propellers shaft, MS shaft for couplings - classification of parts of fishing - replacement of parts during warranty period constitute supply under GST or not - input tax credit on purchase of raw materials. Rate of tax - Marine propellers, Rudder set, Stern tube set, Propellers shaft, MS shaft for couplings - Held that:- As per case of SRI. DHARSAK. V.P. AND SARASWATHI METAL INDUSTRIES [2018 (7) TMI 142 - AUTHORITY FOR ADVANCE RULING, KERALA] ruling issued that commodities such as Marine Propellers, rudder set, stern tube set, propeller shaft and MS shaft for couplings used as a part of fishing /floating vessels would come under entry 252 of 1st schedule and taxable @5% GST. However there is no clarity on the tax rate applicable to the parts shipping vessels as the raw materials attract 18% tax. Classification of parts of fishing - Held that:- As there is specific inclusion of parts of goods covered under HSN 8902, under 15t Schedule, the general tax rate applicable to machinery parts vide HSN 8487 has no applicability, if the vessels are used for fishing purpose. Whether replacement of parts during warranty period constitute supply under GST or not? - Held that:- The replacement of parts during warranty period is a free supply. Warranty is a written guarantee, issued to the purchaser of goods by its manufacturer, promising to repair or replace it if necessary within a specified period of time. If the goods are supplied with warranty, the consideration received as part of supply includes the consideration for the promise to repair or replace . Since the parts are provided to a customer without consideration under warranty no GST is chargeable on such replacement. Input tax credit on purchase of raw materials - Held that:- Even though the raw materials consumed are attracting higher tax rate than the finished products or parts, input tax paid is eligible to avail as input tax credit subject to a condition that such goods or services or both are used or intended to be used in the course or furtherance of his business - As per Section 54 (3) of the GST Law, where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies, un-utilized input tax credit at the end of any tax period can be claimed as refund except input tax paid under IGST. Ruling:- The tax rate of Marine propellers, Rudder set, Stern tube set, Propellers shaft, MS shaft for couplings used as part of fishing vessels, factory ships and other vessels for processing or preserving fishery products are taxable @5% GST. All parts of fishing / floating vessels come under the HSN Code 8902 are taxable @5% under Serial No.252 of 1st Schedule.

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• 2018 (11) TMI 281
  Classification of supply - medicines, consumables and implants used in the course of providing health care services to the patients admitted for diagnosis - composite supply - Whether the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’? Held that:- The in-patient services are classified as exempted service under the sub-group 9993 11. Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an inpatient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. The nature of the various services in a bundle of services will help in determining whether the services are bundled in the ordinary course of business - the medicine and allied goods supplied to inpatient are indispensable items of the treatment and it is a composite supply to facilitate health care services. Pharmacy is an outlet to dispense medicines or allied items based on prescription. The in-patient pharmacy and operation theater pharmacy supplied medicines and consumables only to in-patients. Whereas an outpatient is concerned, hospital gives only prescription, which is an advisory in nature - pharmacy run by hospital dispensing medicine to outpatient or bye standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicine and allied goods are taxable. Government of India vice Circular No.27/01/2018-GST Dt.04-01-2018 has clarified that room rent in hospital is exempted. As for as inpatients are concerned, room facility in a hospital is one limb of bundled service of health care. Ruling:- The supply of medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.

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• 2018 (11) TMI 280
  Classification - rate of GST - quit rent or lease rent paid to Government through Forest Department - Whether quit rent / lease rent paid to Kerala Government on the land used for agricultural purpose (Coffee Plantation) be classified under HSN 9986 or HSN 9973? Held that:- In the instant case vacant land was given by erstwhile Cochin State to the applicant for cultivation on lease rent. Accordingly the petitioner converted the vacant land to Coffee Plantation. Therefore the lease rent collected by Government through Forest Department is exempted from GST vide Heading 9986 of Notification No.12/2017- Central Tax (Rate) / SRO.No.371/2017. The lease rent received in relation to agricultural activities was also exempted under Service Tax regime also. Held that:- The quit rent / lease rent paid to Kerala Government on the land used for agricultural purpose ie, Coffee Plantation be classified under HSN 9986 and eligible for exemption under GST.

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• 2018 (11) TMI 279
  Classification of goods - Classic Malabar Parota - Whole Wheat Malabar Parota - whether classified as bread classifiable under Heading 1905 and eligible for GST exemption or not - exemption from GST vide N/N. 2/2017 - Central Tax/ SRO No.361/2017. Held that:- Bread is a staple food prepared by cooking dough of flour, water and yeast. Whereas parotta is prepared by using ghee or oil. The dough is rolled out and brushed with ghee or oil then folded again, brushed with more ghee and folded again. This is then rolled out to a circle and cooked on a buttered griddle. The heat makes the layers of dough puff up slightly, resulting in a more flaky texture - As per entry 97 of Notification No.2/2017 - Central Tax / SRO. No.361/2017, only specific commodity ‘Bread branded or otherwise’ covered under HSN 1905 is eligible for exemption. As there is substantial distinction between bread and parotta, in preparation, use, taste, digestion, even though both of them are used as food. Therefore the exemption given to the pecific commodity under GST tariff ‘Bread branded or otherwise’ is eo nomine exclusively covered under HSN 1905. It has no wider scope to incorporate different food stuff prepared using wheat flour. The word ‘Food Preparations’ connotes preparations for use, either directly or after processing such as cooking for human consumption. Therefore all food preparations which are not specifically mentioned in any other entry squarely comes under Heading 2106. The plain language used in the heading does not need an interpreter, absolute sententia expositore non indiget. Ruling:- ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota’ classified under Schedule III of GST Laws, vide Heading 2106 ‘Food preparations not elsewhere specified or included’ and is taxable @18% GST. Eligibility of exemption from GST vide Notification No.2/2017 - Central Tax/ SRO No.361/2017 is applicable only for specific commodity ‘Bread branded or otherwise’ covered under HSN 1905.

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• 2018 (11) TMI 278
  Classification of supply - medicines, consumables and implants used in the course of providing health care services to the patients admitted for diagnosis - composite supply - Whether the medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’? Held that:- The in-patient services are classified as exempted service under the sub-group 9993 11. Patients are only admitted to a hospital when they are extremely ill or have severe physical trauma. As far as an inpatient is concerned, hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till discharge from the hospital. The nature of the various services in a bundle of services will help in determining whether the services are bundled in the ordinary course of business - the medicine and allied goods supplied to inpatient are indispensable items of the treatment and it is a composite supply to facilitate health care services. Pharmacy is an outlet to dispense medicines or allied items based on prescription. The in-patient pharmacy and operation theater pharmacy supplied medicines and consumables only to in-patients. Whereas an outpatient is concerned, hospital gives only prescription, which is an advisory in nature - pharmacy run by hospital dispensing medicine to outpatient or bye standers or others can be treated as individual supply of medicine and not covered under the ambit of health care services. Hence such supply of medicine and allied goods are taxable. Government of India vice Circular No.27/01/2018-GST Dt.04-01-2018 has clarified that room rent in hospital is exempted. As for as inpatients are concerned, room facility in a hospital is one limb of bundled service of health care. Ruling:- The supply of medicines, consumables and implants used in the course of providing health care services to in-patients for diagnosis or treatment are naturally bundled and are provided in conjunction with each other, would be considered as “Composite Supply” and eligible for exemption under the category ‘health care services’.

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• 2018 (11) TMI 277
  Maintainability of Advance Ruling application - refund of amount deposited - scope of Sub-Section (2) of Section 97 of GST Laws - Held that:- The request of the applicant is relating with refund of tax paid as he could not complete registration as Casual Taxable Person due to GSTN Portal problems. It is not a matter coming under the scope of Section 97 of GST Laws. Ruling:- The issues relating to refund of tax paid and failure to complete the registration as Casual Taxable Person due to GSTN Portal problems is not a matter coming under the purview of Advance Ruling.

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• 2018 (11) TMI 276
  Recovery of GST dues from the debtors - petitioner does not dispute sizeable outstanding dues to the said tax department but pleads extreme financial hardship in clearing such dues in single installment - Held that:- When this Court has by interim order stayed coercive recoveries of the dues of the petitioner, the respondents could not have insisted on ONGC either paying up the dues of the petitioner to the department or even prevented ONGC from releasing such payments in favour of the petitioner. This would be plainly carrying out coercive recoveries of the dues which this Court by way of interim injunction prevented the department from doing. Notice returnable on 29.11.2018.

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• Income Tax

• 2018 (11) TMI 275
  Stay of demand - payment of 20% of the demand made under Section 68 - Co-operative Banks claiming impecunious circumstances and the possibility of imminent close-down, if such huge amounts are directed to be paid - Held that:- SLP dismissed.

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• 2018 (11) TMI 274
  Gain on account of sale of land - LTCG or STCG - Held that:- CIT(Appeals) granted relief to the assessee by treating the sale consideration arising out of the land as long term capital gain and that arising out of the sale of building as short term capital gain. He, therefore, restricted the addition made by the Assessing Officer. The Tribunal confirmed the view of the CIT(Appeals) observing that he has rightly treated the sale consideration arising out of the sale of land as long term capital gain. With this view, we are in broadly agreement. No question of law therefore arises. Disallowance of provision of Warranty expenses - Held that:- Tribunal noted that the assessee had been making such claim consistent with the past which was never disallowed by the assessing officer in scrutiny the assessment order except the one which was reversed by the CIT(Appeals). The Tribunal relied on the decision of the Supreme Court in the case of Rotork Controls India Private Limited v. Commissioner of Income Tax [2009 (5) TMI 16 - SUPREME COURT OF INDIA] and Bharat Earth Movers v. Commissioner of Income Tax [2000 (8) TMI 4 - SUPREME COURT] and observed that the provision for the warranty was estimated by the assessing officer by scientific basis and was therefore allowable. - Decided in favour of assessee.

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• 2018 (11) TMI 273
  Levy of penalty u/s 271(1)(c) - unexplained deposits of cash amounts in own bank accounts - Held that:- The assessee failed to furnish any explanation about the source of deposit made in the bank account and when no explanation whatsoever has been furnished by the assessee, the question of explanation being bonafide did not arise. No question of law much less any substantial question of law, arises in this appeal. The impugned order in our considered view does not suffer from any infirmity.

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• 2018 (11) TMI 272
  Validity of reopening of assessment - reassessment proceedings were initiated to assess the income which had escaped assessment during the original assessment proceedings - Held that:- In the reassessment proceedings, the income which had already been determined or assessed to tax is also added to the escaped income. If the reassessment proceedings were held to be invalid by the Tribunal or a Court of Law, in that situation, it cannot be held that the original assessment stands obliterated. If the initiation of reassessment proceedings is held to be invalid, the assessee would revert back to the situation where he originally stood, i.e. the original assessment order would revive. The doctrine of merger would have no application in the present case as the subsequent order was held to be unsustainable in law. The said doctrine would apply only in a situation where the subsequent reassessment order has been held to be valid in law. The Tribunal had rightly held that where the reassessment order was annulled, the original assessment order would automatically get restored. No substantial question of law

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• 2018 (11) TMI 271
  Registration to the assessee u/s 12AA - ITAT allowed registration without considering the observation of the CIT - expenses incurred by the trust are not in consonance with the objects of the trust - non-speaking order passed by the tribunal - Held that:- A perusal of the order, Annexure A-2 shows that it is neither speaking nor gives any cogent reasons for granting registration to the appellant under Section 12AA of the Act. The Tribunal while allowing the appeal of the assessee had noticed that the CIT(E) refused registration without disclosing the complete contents of the report and without confronting the same to the assessee. Further, we find that the CIT(E) as well as the Tribunal had not passed the reasoned speaking order which is the mandate. The orders passed by the CIT(E) and Tribunal do not satisfy the requirements of being a reasoned order as enunciated by the Apex Court in M/s Kranti Associates Pvt. Ltd's case [2010 (9) TMI 886 - SUPREME COURT OF INDIA] and is passed in violation of the principles of natural justice as per law laid down by the Supreme Court in V.K. Awasthy's case (2005 (3) TMI 476 - SUPREME COURT OF INDIA) as noticed hereinabove. Accordingly, the appeal is allowed

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• 2018 (11) TMI 270
  Entitlement to exemption u/s 10(10(c) - Voluntary retirement scheme - terminal benefits received by the appellant at the time of voluntary retirement under the Early Retirement Option(ERO) 2003, Scheme - Held that:- Substantial Question of Law was considered in the case of Smt.Kalyani Santhanam -vs- The Income Tax Officer, Ward(2), Tambaram, Chennai-600 045 [2018 (11) TMI 135 - MADRAS HIGH COURT] wherein as decided in view of circular dated 8-5-2009, revenue agreed to allow the benefit of deduction to the appellants under section 10(10C) of the Income-tax Act, 1961, as far as the retired employees of the Reserve Bank of India are concerned. - Exemption u/s 10(10C) allowed - Decided in favour of assessee.

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• 2018 (11) TMI 269
  Nature of expenditure - cost of the acquisition of the computer software - revenue or capital expenditure - Held that:- As appellant fairly submits that substantial question of law No.1, as framed above, cannot be answered in the light of the fact that the assessee has been granted the benefit under Section 10A of the Income Tax Act, 1961 and that the issue has become academic. Recording the said submission, substantial question of law No.1 is left open and not decided. Computation of deduction u/s 10A - expenditure incurred in foreign exchange is liable to be deducted from the export consideration to arrive at the export turnover, the same is not liable to be deducted from the total turnover to arrive at the denominator in the formula - Held that:- This issue is squarely covered by the decision in the case of CIT Vs. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] wherein held what is excluded from ‘export turnover’ must also be excluded from ‘total turnover’, since one of the components of ‘total turnover’ is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible.

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• 2018 (11) TMI 268
  Appointment of 'Special Auditor' under Section 142(2A) - Held that:- There is no complex issue involved in this matter. But, the Assessing Officer, only to drag on the proceedings, has passed the impugned order, appointing Special Auditor. Hence, he prays for allowing the present writ petition. No where, the Assessing Officer was directed to entrust the work with Special Auditor. Moreover, in the impugned order also, there is no whisper as to the complexity involved in the adjudication of the present case. As Special Government Pleader appearing for the official respondents fairly submitted that the impugned order may be quashed and the matter may be remanded for fresh consideration, the order impugned dated 21.03.2013 is set aside and the matter is remitted back to the file of the first respondent for fresh consideration. The first respondent is directed to afford an opportunity of personal hearing to the petitioner and thereafter, pass appropriate orders,

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• 2018 (11) TMI 267
  Allowability of exemption u/s.10(1) in respect of the claim of agricultural income - agricultural activity - assessee claims to be engaged in production of specialized seeds in the leased lands, (1)making of certified seeds; (2) undertaking other processing activities and finally (3) trading of the said certified seeds. Assessee also engaged in the trading activity of the said seeds too - Held that:- On the facts of assessee entering into an agreement with the agricultural landlords-cum-growers for growing the foundation and breeder seeds as per the terms and conditions and also the scientific specifications provided by the assessee, when the assessee bears all the expenditure on land development, irrigation, fertilizers, pesticides, transportation etc., when the assessee pays the land rent and also for the labour, when the landlord acts only as a grower and hands over the entire agricultural produce of foundation and breeder seeds to the assessee at the end. Grower never sold the agricultural produce to the assessee etc. Thus, the activity constitutes agricultural activity as the assessee constitutes an agriculturist and the entire activity of production and growing of said seeds becomes an agricultural activity. The solitary evidence gathered by the AO in the solitary case of Shri Bhuma Bala Narasimha Reddy does not hold good considering the fact that the said evidences was not put to the assessee in a settled perspective of legal proceedings. Therefore, procurement of seeds from the landlords-cum-growers is not the transaction of purchase of seeds for trading activity. Thus the claim made by the assessee is proper. The decision of CIT(A) is fair and reasonable and does not call for any interference. - Decided in favour of assessee. Disallowance u/s.14A r.w. Rule 8D(2) - Held that:- It is a settled issue that the said provisions are not applicable when the exempt income is not includes in the total income of the assessee. Accordingly, relevant grounds in the assessment years under consideration are required to be allowed in favour of the assessee.

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• 2018 (11) TMI 266
  Addition invoking the provisions of section 14A r.w. Rule 8D - non recording of satisfaction before invoking the provisions of section 14A & Rule 8D - Held that:- The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. [2017 (5) TMI 403 - SUPREME COURT OF INDIA] Satisfaction recorded by the AO in Para No.5.1 is extremely based on the suspicion and surmises. The satisfaction arrived at by the AO with reference to the entries in the books of account of the assessee and also having regard to the correctness of the claim of the assessee. In that sense of the matter, the satisfaction recorded by the AO is extremely generic and which falls short of the legal requirement for assuming jurisdiction u/s.14A of the Act. - Decided in favour of assessee. Nature of expenses - Foreign Travel Expenses of Employees - revenue or capital expenditure - Held that:- n the issue of capitalization of the expenditure, in view of the assessee’s submission that the expenses incurred for the purpose other than the purchase of machinery, needs to be verified by the AO, we find this issue needs to be remitted back to the file of AO for verification of correctness of the facts relating to this claim. AO is directed to verify the expenses in this regard after granting reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Classification issues qua the depreciation rates - held that:- AO classified certain items as Furniture and allowed depreciation at the rate applicable to Furniture and certain items as Plant and Machinery and allowed depreciation at the rate applicable to them by applying functional test. Eventually, in the assessment made u/s.143(3) r.w.s. 153A of the Act, the AO made addition of ₹ 1,44,126/- being difference in depreciation @10% and 15% on some items under block of Plant and Machinery treating the same as Furniture. Before the CIT(A), the assessee submitted that this issue has been decided in favour of the assessee for the A.Yrs. 2006-07, 2007-08 and 2008-09. The CIT(A) after considering the submissions of the assessee and the order of CIT(A) for the A.Y. 2008-09 allowed the appeal of the assessee. Thus we find this issue has already been adjudicated by us against the Revenue and in favour of the assessee while dealing with the appeal of the Revenue. Provision for Leave Encashment disallowance - Held that:- We find this issue stands decided against the assessee by virtue of the order of Tribunal in the assessee’s own case for the A.Y. 2009-10. Disallowance of Demat charges as claimed as expenditure incurred for earning income from capital gains - Held that:- We find this issue is also a decided issue in favour of the assessee by virtue of the order of Tribunal in the assessee’ own case for the A.Y. 2009-10 we respectfully following the order of the Tribunal in assessee’s own case for A.Y. 2004-05 allow the claim of the Portfolio Management fees as an allowable expenditure. The ground raised by the assessee is accordingly allowed. Disallowance of expenditure relating to laying of water pipelines - revenue or capital expenditure - Held that:- We are of the opinion that the expenditure incurred on laying of the water pipeline involving the land owned by Maharashtra Government constitutes Revenue expenditure Disallowance on account of selling and distribution expenses - Held that:- scope of the CBDT Circular cannot be extended to the pharmaceutical companies without having any enabling Notification or Circular for Medical Council of India. Consequently, the present assessee being a pharmaceutical company is outside the scope of the said circulars of MCI and the CBDT. Considering the settled nature of the issue and following the rule of consistency, this ground raised by the assessee needs to be allowed in favour of the assessee. Disallowance of rent paid for Bungalow located at 70, Koregaon Park, Pune - expenditure allowable u/s.37(1) - Held that:- Expenditure on account of rent paid on the house property is allowable in favour of the assessee. We allow the expenditure on account of rent paid in favour of the assessee and remit the issue pertaining to depreciation with identical directions. Disallowance of bogus purchases - Held that:- We are of the opinion that the matter should be remanded to the file of CIT(A) for considering the above decision of the Tribunal in the case of Chhabi Electricals Pvt. Ltd. (2017 (6) TMI 514 - ITAT PUNE) after due verification of the facts of the present case. Accordingly, the ground raised by the assessee on merits is allowed for statistical purposes. MAT computation - Disallowance on account of Wealth Tax paid - Held that:- The wealth tax payment constitutes an ascertained liability for MAT purposes. Considering the favourable decision in favour of the assessee, we allow Ground raised by the assessee.

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• 2018 (11) TMI 265
  TPA - selection of MAM - application of the Transactional Net Margin Method (TNMM) in respect of its international transaction of trading activity as against Resale Price Method (RPM) as the most appropriate method - Held that:- The Tribunal in assessment years 2009-10, 2010-11 has approved the application of the RPM as most appropriate method. In doing so, it also relied on the order passed by it for the assessment year 2008-09. The Ld. DR failed to point out any distinguishing feature in the international transaction under dispute for the year under consideration vis-à-vis the preceding years. Respectfully following the precedents, we hold the RPM to be the most appropriate method in respect of distribution activities undertaken by the assessee under the international transaction of `Import of finished goods’. Accordingly, the impugned order is overturned to this extent. Non ranting functional adjustment relating to foreign exchange (forex) loss - Held that:- The amount of foreign exchange gain/loss arising out of revenue transactions is required to be considered as an item of operating revenue/cost, both for the assessee as well as the comparables. The ground taken by the assessee is, therefore, dismissed. Not allowing import duty adjustment - Held that:- Whether the import duty has been paid or not or paid to lower extent by the comparables cannot have any effect over computation of gross profit margin of the comparables. If the assessee has made costly purchases, it will naturally earn more revenue from the sales as well. One can compare apple with apple and not with orange. If purchase of goods is of higher quality and costly, it is but natural that the sale will also be correspondingly at a higher price. It is impermissible to claim that the amount of higher import duty paid by the assessee should be adjusted in isolation without having effect on the higher sales price realized from the sale of such imported goods. Once we take figure of gross profit, it takes into account not only the higher debit side of cost of purchases but also the higher credit side of the revenue earned from sales. No adjustment on account of separate items resulting into the computation of gross profit can be permitted. In our considered opinion, the stand taken by the assessee for allowing separate adjustment in respect of higher custom duty paid by it has been rightly rejected in the first appeal. Exclusion of Roselabs Limited and Novartis India Limited from its list of comparables and inclusion by the TPO of Mankind Pharma Limited as a comparable company - Held that:- Following the view taken by the Tribunal in its order for the preceding year in the case of the assessee itself, we set aside inclusion/exclusion of the two companies mentioned above and remit the matter to the file of Assessing Officer/TPO for examining their comparability or otherwise afresh after allowing a reasonable opportunity of hearing to the assessee. Granting benefit ±5% margin to the assessee in determining the ALP - Held that:- it is found that the Ld. CIT(A) granted the benefit of ±5% without any standard deduction in view of the amendment to Section 92C(2A) by the Finance Act, 2012 with retrospective effect. In view of legislative amendment carried out retrospectively, the assessee cannot claim any standard deduction. We, therefore, hold that ld. CIT(A) was justified in giving benefit of ±5% on individual basis without any standard deduction.

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• 2018 (11) TMI 264
  TPA - Advanced Pricing Agreements (APA) made u/s.92CC - Held that:- In this case the APA is found applicable to the earlier assessment years in those cases, as the case may be, when the facts of the A.Y. 2008-09 are similar to that of the assessment year covered in the APA. The matter should be remanded to the file of AO/TPO, as the case may be, for the purpose of comparing the facts of the case and the relevant terms of agreement between the CBDT and the assessee. AO is directed to examine the facts closely and conclude the assessee on the issue of applicability of APA to the assessee’s case for the year under consideration in principle. Claim of deduction of the assessee u/s.10A, 10AA - Held that:- Considering the binding nature on the issue in the assessee’ own case as well as jurisdictional High Court judgment in the case of CIT Vs. Schmetz India Pvt. Ltd.[2016 (2) TMI 1064 - SUPREME COURT] we are of the opinion that the AO has not made out a case that there exists an arrangement and the said arrangement is malafide and it falls in the mischief of the provisions of section 80IA(10) r.w.s. 10A(7) of the Act.

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• 2018 (11) TMI 263
  9% disallowance on account of bogus purchases - Held that:- The rationale being no sales is possible without actual purchases. This proposition is supported from Hon'ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT] upheld 100% allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation 12.5 % disallowance out of the bogus purchases meets the end of justice. However in this regard learned counsel of the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. Disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transaction. - decided partly in favour of assessee.

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• 2018 (11) TMI 262
  Disallowance on account of bogus purchases - purchases/sales without any actual delivery of goods - hawala purchases - AO added 12.5% of such purchases - CIT(A) restricted the disallowance to 9%. - Held that:- In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases meets the end of justice. However in this regard it is further noteworthy that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase, as otherwise there will be double jeopardy to the assessee. Accordingly, modify the order of the CIT(A) and direct that the disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transaction. - Decided partly in favour of assessee.

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• 2018 (11) TMI 261
  Unexplained cash credit u/s 68 - Bogus LTCG - addition of sale proceeds of the shares as undisclosed income - assessee introduced unaccounted money by way of bogus LTCG - exemption u/s 10(38) denied - addition of commission - Held that:- We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act - Decided in favour of assessee. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We note that though the department was aware that the assessee had purchased the 25000 shares of M/s. NFGL in AY 2013-14, for ₹ 32,21,269/- has not reduced the same from the total sale consideration of ₹ 2.16 cr. It is elementary that income can be computed only after defraying the cost. So the action of AO to add the entire sale consideration of ₹ 2.16 cr. itself is arbitrary exercise of power and cannot be sustained. Therefore, the action of the Ld. CIT(A) in confirming the addition of entire sale consideration of M/s. NFGL is perverse and is directed to be deleted. Consequently, the addition of 5% as commission to the tune of ₹ 10,82,460/- cannot be also sustained and ordered to be deleted. - Decided in favour of assessee.

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• 2018 (11) TMI 260
  Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that:- We find that the notice dt. 15-12-2010 issued u/s 271(1)(c) of the Act, copy of the same is on record, does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - decided in favour of assessee

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• 2018 (11) TMI 259
  Addition on Fringe Benefits on account of medical reimbursement expense - value of FBT on account of medical expenses for treatment in the approved hospital - penalty imposed by the AO u/s 271(1)(d) - Held that:- Following the decision rendered by the coordinate Bench of the Tribunal in Vijaya Bank [2011 (8) TMI 751 - ITAT BANGALORE] which is squarely applicable to the facts and circumstances of the case, we are of the considered view that medical reimbursement expenses is prerequisites in the hands of employees and is taxable as such, even if medical expenses are in excess of ₹ 15,000/- and as such cannot be subjected to FBT because once the item as prerequisites is exempted in the hands of individual employee, the same cannot be subjected as FBT. CIT (A) has rightly deleted the addition made by the AO in AY 2006-07 to the value of FBT on account of medical reimbursement expenses. However, the CIT A) has erred in deleting the addition in AYs 2007-08 & 2008-09 on account of medical reimbursement expenses to the extent of 50% only. For AYs 2007-08 and 2008-09 also entire addition is liable to be deleted. So, ground against the Revenue. Addition of 50% in the value of FBT on account of medical expenses for treatment in approved hospitals - Held that:- We allow 85% of the amount incurred by the assessee on account of medical expenses for treatment in the approved hospitals for the reason that possibility of 15% of such cases being overlooked cannot be ruled out for AYs 2007-08 & 2008-09. Even otherwise, the ld. Representative for the assessee has shown his inability to produce old record for verifications. Addition to the value of FBT on account of maintenance expenses of township - no such amount is being taxed as prerequisites in the hands of employees and treated the same as deemed FBT u/s 115WB(2)(E) - Held that:- When the assessee is responsible for upkeep and maintenance of the townships, the same cannot be said to have erected for the welfare of the employees rather it is a necessity for the assessee to run the business in the remote areas as well as to enable the employees to serve in the remote places. So, we are of the considered view that in AY 2006-07, the ld. CIT (A) has rightly deleted the addition made in the value of FBT on account of maintenance expenses of townships. But ld. CIT (A) in AYs 2007-08 & 2008-09 has erred in confirming the addition on this account, hence ordered to be deleted. Penalty u/s 271(1)(c) - Held that:- Revenue has failed to make out the case of concealment of particulars of fringe benefits or furnishing of inaccurate particulars of such fringe benefits and secondly, addition made by the AO and confirmed by the ld. CIT (A) has been deleted by the Tribunal, provisions contained u/s 271(1)(d) of the Act are not attracted, hence penalty levied by the AO is not sustainable and the ld. CIT (A) has rightly deleted the same.

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• 2018 (11) TMI 258
  Addition of an amount which is related to the provision for bad and doubtful debts - whether an express provision in section 36(1)(vii) which prohibits granting deduction of any provision for bad and doubtful debts can be got over by the assessee? - Held that:- Section 36(1)(viia) is a complete answer to this query raised by the assessee wherein special provisions are made in the I.T. Act for allowing provision for bad and doubtful debts of scheduled banks, non-scheduled banks, co-operative banks etc. to the extent permissible thereunder. In fact, u/s. 36(1)(viia), the eligible banks are authorized to create provision subject to certain limits in respect of rural advances and other loans referred to therein and claim deduction of the same. This provision clearly indicates that Parliament is well aware of the risk undertaken by the banks in making advance to the rural sector in terms of the guidelines issue by the Government and the RBI and only such cases are treated as exception to the general provision contained in Explanation to section 36(1)(vii), which prohibits granting of deduction of any provision for bad and doubtful debts. Unfortunately, the present assessee is not covered by section 36(1)(viia) of the I.T. Act and so much so, explanation to section 36(1)(vii) squarely applies or in other words, the assessee is not entitled to deduction of any provision created for bad and doubtful debts, no matter such provision is created based on the prevalent accounting policies. - Decided against assessee.

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• 2018 (11) TMI 257
  Adhoc disallowance out of administrative expenses, traveling expenditure and conveyance expenditure - Held that:- Though the AO has not made any discussion in the Asstt.Year 2009-10 and straight-away disallowed this expenditure, but the CIT(A) has devoted some energy and justified disallowance. We do not appreciate the approach of the AO, but simultaneously the quantum is so less that litigation cost to the assessee will be more for verification of the vouchers, bills, in order to find out whether these expenditure were wholly and exclusively incurred for the purpose of business. Considering this aspect, the ld.counsel did not emphasise much on this issue. Therefore, taking into consideration overall circumstances, we confirm the adhoc disallowance which has been made on estimate basis. Disallowance with regard to the depreciation - Held that:- It is pertinent to observe that it is highly difficult to bring demonstrative evidence before the AO showing exclusive user of the cars for the business of the assessee. In the given facts and circumstances, we deem it appropriate to remit this issue to the file of the AO. AO shall find out if the cost of purchase is borne by the company, then it will be construed that de facto vehicle is owned by the assessee company. For example, if a particular vehicle was purchased on loan and instalments were paid from the accounts of the assessee, then it will be construed that vehicles belong to the company. It is also to be seen if the assessee has established incurrence of fuel expenditure and purchase cost of vehicles, then depreciation should be granted to the assessee, otherwise, the ld.AO shall decide the issue in accordance with law.

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• 2018 (11) TMI 256
  Validity of Assessment u/s 153C - no satisfaction as recorded u/s 153C in the case of the person searched - Held that:- The document referred to in the assessment order and satisfaction note and Order of the A.O. Dated 14.02.2013 rejecting the objections of the assessee, clearly reveals that Faculty Engagement Agreement may not relate to the assessment year under appeal. Therefore, the condition precedent for issuing notice under section 153C are not satisfied in this case because no satisfaction have been recorded under section 153C in the case of the person searched and no incriminating material was seized pertaining to assessment year under appeal. Since the conditions of Section 153C are not satisfied in the present case, therefore, assumption of jurisdiction by the A.O. to issue notice under section 153C is void abinitio and bad in law and vitiate the entire assessment proceedings under section 153C. The decisions relied upon by the Ld. D.R. would not apply to the facts and circumstances of the case. The issue is covered in favour of the assessee in the case of ACIT, Central Circle-9, New Delhi vs. M/s. Victory Accommodations Pvt. Ltd., Delhi (2018 (7) TMI 57 - ITAT DELHI). Set aside the Orders of the authorities below and quash the initiation of re-assessment proceedings under section 153C - Decided against assessee.

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• 2018 (11) TMI 255
  TPA - ALP determination - disallowance of cost incurred by assessee - whether the payments made by assessee or cost incurred by the assessee for the shared services was justified or not? - Held that:- The assessee had availed services from its associated enterprises for which cost was incurred and on the other hand, the assessee had provided said services to various Eaton entities and was being remunerated on cost plus markup at 8%. The TPO had not disturbed the margins of assessee but on the other hand has disallowed cost incurred by assessee to be not at arm's length price. In order to make earnings, the corresponding costs have to be allowed; the assessee had incurred cost on Oracle Implementation provided by Eaton Ltd., UK and said Oracle platform was used by assessee to integrate its operations of APSSC unit in order to provide back office accounting services to Eaton entities. Once the transaction is closely and intrinsically linked to the business operations carried on by the assessee, then the same cannot be segregated and arm's length price of said transaction could not be taken at Nil. We find no merit in the approach adopted by TPO in this regard. Accordingly, we hold that there is no merit in disallowance made by TPO, which was upheld by CIT(A) Selection of comparables by assessee / TPO - Held that:- Referring to functions performed by assessee of providing marketing support services companies functionally dissimilar with that of assessee need to be deselected from final list. Where the comparables selected are not functionally comparable to the tested party, then the margins of such concern cannot be utilized for determining the arm's length price of international transactions undertaken by tested party. In view thereof, we direct the TPO to exclude margins of Agrima Consultants International Ltd. while benchmarking international transactions of assessee in both the segments pertaining to marketing and business support services and computer the arm's length price of international transactions after including Times Innovative Media Ltd. in market support services segment. The additional ground of appeal raised by assessee is thus, allowed. Non granting due credit of advance tax paid - rectification application before the Assessing Officer under section 154 - Held that:- AS Authorized Representative for the assessee before us has pointed out that the said rectification application has not been disposed of till now. We direct the Assessing Officer to dispose of rectification application after due verification of the claim of assessee.

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• 2018 (11) TMI 254
  Disallowance of loss claimed on mark to market on account of trading of derivative instruments by treating the same as notional loss and treating the same as contingent liability - AO held this is unascertained liability and merely provision and hence cannot be allowed - Held that:- The assessee is booking profits on derivatives as and when it is valued at the end of the year and as and when the loss is arising, the same is claimed as deduction. This practice is followed by assessee regularly and Tribunal in assessee’s own case in immediate preceding year i.e. AY 2011-12 as allowed the claimed of the assessee, respectfully following the same, we allow the claim of the assessee. This issue is exactly identical in these four appeals of Revenue, hence, taking a consistent view, we dismiss this issue of Revenue’s appeals. Disallowance of expenses relatable to exempt income by the AO by invoking the provisions of Section 14A of the Act read with Rule 8D(2)(ii) & (iii) - Held that:- Once this is the position, the issue is squarely covered by following the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Respectfully following the Bombay High Court decision and considering the facts of the case, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. AO can verify the investment giving exempt and investments which are kept as stock in trade can be disallowed. Apart from that the assessee has recomputed the disallowance which may be accepted. We find that the plea of the assessee is quite reasonable and hence, accordingly we restore this issue back to the file of the AO who will determine the investment held in stock in trade and he will disallow the interest only on the investments kept as stock in trade but only qua the investment giving exempt income. Accordingly, this issue of Revenue’s appeal is partly allowed for statistical purposes.

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• 2018 (11) TMI 253
  Disallowance of expenditure as busniss discontinued of power distribution - Legal Scope on discontinuation of business - intention to continue the business - Held that:- It is a settled legal proposition that the existence of “intention” to continue business and its demonstration by the assessee assumes significance in matters relating to decision on the cessation of business. The undisputed facts of (i) demonstration by way of passing of Resolution by AGM of assessee for continuation for fighting for renewal of license (ii) approaching the State Govt. MERC, APTEL, Supreme Court etc. for renewal of license, (iii) opposing the takeover bid of the MERC for MSEDCL with or without consideration; (iv) compliance to the legal orders of Supreme Court/APTEL without prejudice to the demand for renewal of license; (v) assessee never entertained the idea of sale of assets and infrastructure to MSEDCL, (vi) assessee did not entertain the idea of lease of assets too; (vii) assessee did not resort to liquidation or insolvency, (viii) assessee receives compensation of ₹ 1 crore plus every month from MSEDCL and reports to income tax office every year; (ix) no authority/executive/judiciary ever rejected the demand for renewal of license till date. Further, various committees recommended for grant of renewal of license to the assessee along with MSEDCL along with subsidy if any. Therefore, all these undisputed facts, in our view, support the existence of “intention” to do business of power distribution. The business of the assessee cannot be held to be a discontinued one. All the administrative expenses have to be allowable as business expenditure. - Decided in favour of assessee. Expenses debited to Profit and Loss Account constitute business expenditure eligible for claim of deduction u/s.37 - Held that:- We heard both the sides and examined all the accounts debited to profit and loss account of the year/assessee and found, prima-facie, that they are allowable expenditure and the salary expenses, bonus expenses, audit fee etc. relate to business expenditure allowable u/s.37 of the Act. However, there is no categorical finding by AO/CIT(A) with respect to the allowability of these expenditures accounts. In the absence of the same, we cannot decide this issue at this point of time as there is no adverse finding or otherwise exists on the allowability of disallowability of the expenses - We remand this issue to the file of AO for fresh adjudication both on the genuineness as well as on the allowability of the expenses amounting to ₹ 40.90 crores. We direct the AO to pass a speaking order on the claim in all individual accounts debited to profit and loss account. - - Decided in favour of assessee for statistical purposes. Set off of current year business loss against the scrap sales income and carry forward of loss - Held that:- We find that the set off of carry forward of the unabsorbed loss issue needs to be decided as per the provisions of Sections 70 to 72 of the Act. Thus, we direct the AO to pass a speaking order on this aspect of the claim of the assessee. It is also the claim of the assessee before us that the brought forward losses from earlier assessment years were not properly allowed in the order of the AO due to their adverse decision on the “intention to continue the business”. AO is directed accordingly.

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• 2018 (11) TMI 252
  Undisclosed investment addition - stock discrepancy addition - alleged discrepancies found in paddy stock during the course of survey - gross profit estimation @ 8.92% - Held that:- The assessee reiterates his stand adopted throughout that the impugned addition is not based upon any material fund during the course of survey since both the lower authorities have gone by the alleged survey statement only which is against CBDT’s circular dated 10.03.2003. We find no merit in either of these two submissions. It has come on record that both the lower authorities have made the former addition based on physical verification to assessee’s paddy stock during the course of survey there on mere statement recorded therein or with reference to any vague evidence. We thus find no reason to delete the impugned addition in principle. Now comes the equally important question as to whether the entire discrepancy in stock addition or only the profit element embedded therein is to be considered for the impugned addition. We find this issue to be no more res integra as co-ordinate bench of this tribunal in M/s Subarna Rice Mill vs. ITO [2015 (7) TMI 522 - ITAT KOLKATA] holding only the profit element liability to be added in such circumstances; stand upheld by hon'ble jurisdictional high court’s recent judgment [2018 (8) TMI 1475 - CALCUTTA HIGH COURT]. We therefore conclude that the impugned former addition of the entire discrepancy in stock deserves to be deleted.

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• Customs

• 2018 (11) TMI 245
  Cancellation of the CHA Licence - violation of Regulation 14(d) of the CHALR, 1984 - jurisdiction of CESTAT to grant relief by taking a lenient view, the power for which does not come out of the parent enactment - violations of Regulation 14(a) and 14(l) of the CHALR 1984 - relevant/partly relevant evidences - penalty u/s 112(b) of the Customs Act, 1962. Whether the CESTAT is right in law in setting aside the order of cancellation of the CHA Licence after holding that there is a violation of Regulation 14(d) of the CHALR, 1984 by the CHA? - Held that:- In the case of Interport Impex P. Ltd. [2016 (12) TMI 519 - BOMBAY HIGH COURT] and Ajay Clearing [2016 (4) TMI 230 - BOMBAY HIGH COURT], this Court has held that the Tribunal in taking a liberal view had not exercised its discretion arbitrarily or capriciously and its order could not be termed as perverse or vitiated by any error of law apparent on the face of the record. This Court like in the present case held that the loss already suffered from the date of revocation till the date of the impugned order of the Tribunal was sufficient and no further revocation of licence was warranted - the impugned order has not taken a view which is in any manner perverse and / or arbitrary - decided in favor of assessee. Whether CESTAT, which is a creature of the Statute, is vested with the jurisdiction to grant relief by taking a lenient view, the power for which does not come out of the parent enactment? - Held that:- This question has already been answered by the Supreme Court in K.M. Ganatra [2016 (2) TMI 478 - SUPREME COURT], where the Supreme Court has held that the Tribunal has power under the Customs House Agents Licensing Regulations to modify the order of the Commissioner by taking a lenient view and restricting the period of revocation - Revenue does not dispute this position and hence this question stands answered in the affirmative in favour of the Assessee. Whether the findings of the CESTAT that there are no violations of Regulation 14(a) and 14(l) of the CHALR 1984 by the CHA are based on no evidence or partly relevant or partly irrelevant evidence and are otherwise perverse and arbitrary? - Held that:- In so far as the other charge of violation of Regulation 14(l) of the 1984 Regulations viz. the preparation and presentation of the documents (Shipping bills) is concerned, the Tribunal held that the Appellant was not able to prove that the documents prepared / presented by Respondent Custom House Agent was not in accordance with the orders, if any, relating thereto. Further no such orders were in existence. The Tribunal has taken a view that the Customs Officer would in any event have scrutinized the compliance or otherwise of the documents filed before them before the consignments were cleared. The Tribunal accordingly found that the alleged violation on the part of the Respondent in not preparing or presenting documents to the Customs Authorities strictly in accordance with the Rules and orders relating thereto to have not been proved - this view taken by the Tribunal that the Respondent is not guilty of the charge of having violated Regulation 14(l) of the 1984 Regulations is a possible view taken by the Tribunal on the evidence and material on record which cannot be held to be in any manner perverse and / or arbitrary - decided against Revenue. Whether CESTAT can ignore that a penalty of ₹ 5,00,000/- under Section 112(b) of the Customs Act, 1962 was imposed on the CHA by Commissioner of Customs (Preventive), which was reduced to ₹ 2,00,000/- by the CESTAT itself, which was upheld by Hon'ble Apex Court, thereby confirming the involvement of the CHA in the case? - Held that:- This substantial question of law does not arise from the impugned order of the Tribunal. Accordingly, the Revenue does not press this question of law. Appeal dismissed - Decided in favor of respondent-assessee.

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• 2018 (11) TMI 244
  Scope of Regulation 21 of CHAL, 2014 - Role of CHA - The petitioner submits that the declaration in the bill of entry was signed by the Importer. - forbearance to the 1st respondent from proceeding against the petitioner-CHA under Regulation 21 of CHAL, 2014 - vicarious liability in the proceedings - Penalty - grievance of the petitioner arise from the multiplicity of proceedings initiated by the respondents at varying times in consequence of the offence case booked by DRI against one of their clients and arrayed as an abettor for his role in the clearance of the disputed goods. Held that:- The perennial litigations from 2009 in the attempt at enforcing the punitive provisions under the CHALR, 2014 against the petitioner is a classic case of cat and mouse game between the Department and petitioner that is nobody's cause. A cursory reading of regulations 13 and 21 indicates that the prohibition contemplated under Regulation 21 is aimed at separating the CHA from access to offices and sections connected to the offence to prevent unwanted influence or sabotage - This order is normally passed immediately after the commission of any offence. In other words, Regulation 21 will outlive its purpose once substantive investigations in the offence case is over. The consequences of wrong doing for a CHA licensee is in the suspension and revoking of the license of the CHA under Regulation 22 - also, once proceedings under Regulation 22 is initiated which is normally done after the completion of investigations in a case, the proceedings under Regulation 21 go redundant. The entitlement to do the business of CHA is to be tested in a proceedings under Regulation 22 of CHALR, 2014. And Regulation 21 cannot be used as a tool to prevent the CHA from doing business. Petition allowed - decided in favor of petitioner.

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• 2018 (11) TMI 243
  Classification of imported vessel - M V royal Sesa - classifiable under CTH 89019000 or under CTH 89059090? - benefit of N/N. 12/2012-Cus dated 17.03.2012 (Sr No 461) and N/N. 21/2012-Cus dtd 17.03.2012. Whether the vessel imported declared as Self Propelled Navigable Transhipment Cargo Barge classifiable under the CTH 89019000, and exempt from payment of duty under Notification No 12/2012-Cus dated 17.03.2012 (S No 461) and Notification No 21/2012-Cus dated 17,03,2012, or under 89059090 and subjected to duty at appropriate rate? Held that:- The vessel is not a normal passenger or cargo vessel but has been designed and fitted with number of equipments for performing specific functions for which the vessel has been designed - From the structure of Chapter 89, it is quite evident that navigability is not a criteria for determination of the Classification under the said chapter. Navigability would be one of the features for all the goods classifiable under chapter 89 - Classification of any vessel is based on its essential character ascertained on the basis of the functional features, structural design and the equipment fitted on board the vessel. It is the basic design keeping in view the function that is intended to be performed which determine the classification of the particular vessel. The appellant are claiming classification of the vessels under CTH 8901 on the ground that the vessel is principally designed for transport of goods and navigability is one of the main functions of the vessel - On perusal of the certificates and experts classification it is observed that these certificates have been issued by the various authorities to certify the availability of certain features such as navigability etc, but none of these certificates identify the essential character and function of the said vessel. Further these certificates cannot be the sole basis of classification under the CTH and the classification needs to be determined only after ascertaining the main/ essential function intended/ performed by the vessel and terms of the relevant tariff heading. It is not in dispute that under the HSN Explanatory Notes crane barge / floating cranes are classifiable under Chapter 8905 of HSN. In the present case, the vessel imported was fitted with cranes, and cranes provided the pre dominant usage and functional basis to the vessel - navigability was not even the basic design essential for this vessel. One factor which makes this case unique and distinguishable from all other cases is the declaration made by the exporter to the Customs Authority in China. Exporter has declared the said vessel as floating cranes as is evident from the documents resumed during the investigation. When the exporter himself is declaring the vessel as floating crane then how can the appellants claim the vessel to be different from the said declaration? Change in the nomenclature from Floating Transfer Station to Crane Barge - Held that:- Various emails, discussions etc recovered during the course of investigation, regarding the classification, application for license under EPCG, decision not applying for the same and the consequential directions for the CHA s to change the description to Cargo Barge show that appellants had knowingly adopted the description to suit their convenience and classify the goods under heading 8901 so that they can avail the benefit of exemption. It was part of a well thought out strategy to evade duty of Customs. The vessel M V Royal Sesa imported vide B/E No 006/JGD/12-13 dated 15.04.2013 is correctly classifiable under heading 89059090 and benefit of exemptions claimed is not admissible to them. Demand of Interest - Held that:- Demand of interest is a natural consequence on account of delay in payment of the tax. Since appellants have short paid the Customs duty interest is demandable from them under Section 28AA of the Customs Act, 1962. Penalty u/s 114A - Held that:- The word or should be read as and and penalty should be equivalent to the total of duty and interest short paid. Appeal disposed off.

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• 2018 (11) TMI 242
  Maintainability of appeal - whether the Revenue has right to appeal against the order of Commissioner? - Held that:- A reference can be made to Tribunal’s decision in the case of CC, New Delhi Vs. M/s Sunrise Freight Forwarders Pvt. Ltd. [2017 (3) TMI 159 - CESTAT NEW DELHI], where reliance placed in the case of COMMISSIONER OF CUS., MUMBAI Versus IMPEX CLEARING & SHIPPING AGENCY [2002 (5) TMI 811 - CEGAT, MUMBAI], where it was held that the right to prefer an appeal to the Tribunal under Sec. 129A of the Customs Act, 1962 against an order passed under Regulation 21 or 23 is available only to the CHA - Revenue’s appeal dismissed as not maintainable.

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• 2018 (11) TMI 241
  Classification of imported goods - Helium Leak Testing Machine Twin Chamber with Recovery System - whether classified under CTH 9031 or under 9026? - benefit of N/N. 24/2005-Cus (S No 31) - Held that:- From the perusal of the complete technical literature it is quite evident, that item under importation, cannot be called an instrument or apparatus as understood in common parlance. Even going by the definition of the term instrument as referred to by the appellants in their submissions i.e. ““A device for measuring and sometimes also recording and controlling the value of quantity under observation.” The item imported fails to qualify as an instrument because the item is itself not a device, but a combination of various instruments, apparatus and devices, and referred to by term “system” in the technical literature - As per note 3 and 4 to Section XVI made applicable to chapter 90 by virtue of chapter Note 3 to said chapter, the item will qualify only as machine. From the opinion of Chartered Engineer and also the technical literature, it is evident, that the said machine is used for detecting leakage and not for the purpose of measuring or checking the flow, level, pressure or other variables of liquids or gases - There are two Chartered Engineers Certificate produced one is dated 28.09.2008 and second dated 5.10.2008. While that dated 28.09.2008 is in respect of the item under consideration, the second one is determining the classification of the item - It is well settled law that determination of classification is the function of assessing authority and the Chartered Engineer has no jurisdiction to determine the same. Hence the second opinion has to be ignore and classification determined on the basis features of machine along with the first opinion of Chartered Engineer. Simple reading of the said explanatory note makes it clear that miscellaneous measuring and checking devices are classified under heading 9031, whereas only those with specific functions as specified by terms of heading of 9026 have been classified in that heading. Since the item in question is not used for measuring any parameters in relation to liquid or gasses the same is more appropriately classifiable under heading 9031 - thus, the item “Helium Leak Testing Machine Twin Chamber with Recovery System” appropriately classifiable under heading 9031 49 00, the benefit under Notification Number 24/2005-Cus (S No 31) is not admissible to them. Appeal dismissed - decided against appellant.

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• 2018 (11) TMI 240
  Levy of export duty - Cow Split Wet Blue Leather - Cow Pickle Leather - benefit of nil rate of duty as per Notification No.133/2000-Cus dated 17.10.2000 - it was alleged that there are export of unfinished leather items by mis-declaring the same as finished leather by wrongly claiming the benefit of Notification No.133/2000-Cus dated 17.10.2000. Whether the exported goods were finished (as claimed by the exporter) or were unfinished or partially finished leather (as claimed by the Department)? Held that:- It is pertinent to note that the term Finished Leather used in the Notification is to be interpreted in terms of ITC Pubic Notice No.3/ITC(PN)/92-97, dated the 27th May, 1992 in terms of the Explanation appended at the foot of the said Notification - Reference to the relevant ITC Public Notice (supra) reveals that Industrial Leathers are to be considered as finished, subject to certain minimum operations in manufacture which ought to carried out on them. List of the processes specified include Levelling, Fatliquoring, Shaving/snuffing of the grain and other processes specified in the ITC Public Notice. However, from the impugned order, it is seen that the adjudicating authority has not examined the exported goods from the perspective of whether they have been subjected to any or all of these processes. The test reports only confirmed the fact that the goods are permitted for export and that they are in the nature of Cow Split Wet Blue Leather. The test reports do not record what processes have been carried out on the leather which were being exported. The meaning of the term finished leather is required to be considered in terms of what is specified in the ITC Public Notice referred above. The ITC Public Notice lists out a series of several processes which the leather should have been subjected to for considering the same as finished leather. But it is seen that the Adjudicating Authority has made no reference to the ITC Public Notice, nor has he examined whether the exported goods have been subjected to these processes or atleast some of these processes - It is seen that the exported goods have been entered for export, the relevant bills of export have filed, goods examined, even samples drawn and opinion of CLRI taken and finally, allowed for export. In the bills of export benefit of exemption notification has been claimed and the same has been allowed. Before denial of such benefit at the stage of adjudication, the onus is on Revenue to establish that the exported goods had not satisfied the conditions of the notification. In our view, Revenue has failed to discharge such burden - The onus is on Revenue to establish that the conditions of the Notification were not satisfied. In the circumstances of the present case, it is concluded that the Revenue has failed in satisfying the said onus. Consequently, the demand and penal proceedings against M/s. M.N.Roy Sons as well as its proprietor are set aside. Penalty on the M/s. Indo Foreign (Agents) Pvt. Ltd. under Section 117 of the Customs Act, 1962 - Held that:- M/s. Indo Foreign (Agents) Pvt. Ltd. had filed the bills of entry on the bonafide belief that the goods do not attract export duty. Such documentation was filed on the basis of the export documents handed over to them by the exporter. As such, CHA cannot be held liable for any penalty. The demand for export duty is not sustainable and have been set aside - Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 239
  Refund of duty paid at the time of export - export duty on ‘iron ore fines’ was rescinded vide notification dated 7th December 2008 - Relevant date of export - Held that:- The goods were entered for export before 7th December 2008 when export-duty on ‘iron ore fines’ subsisted. Notwithstanding the date of departure of the vessel under section 16 of Customs Act, 1962, the grant of ‘let export order’ is the relevant date on which date the export formalities are completed and clearance allowed under section 51 of the Customs Act, 1962 - refund cannot be allowed - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2018 (11) TMI 248
  Winding up petition - proof of debt due - Held that:- As no conclusion can be made that any amount is due or payable by the respondent to the petitioner. There is no debt due to the petitioner. There is hence, in my opinion, no merit in the present petition. No grounds are made out to pass an order for winding up of the respondent Company. Transfer of the proceedings to the NCLT - Held that:- The facts in the present case demonstrate that there is no material on merit to substantiate filing of the present winding up petition. It appears that the present application/request to have the matter transferred to NCLT is only an attempt to further delay and prolong the proceedings. Having come to a conclusion that there is no merit in the petition, see no reason to transfer the petition to NCLT. Also the old management of the Association, it appears cannot continue with the present proceedings. The new Management who were elected have decided to withdraw the present winding up petition. Accordingly, the present petition is even otherwise not maintainable in view of the decision taken by the new management of the petitioner to withdraw the present petition.

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• 2018 (11) TMI 247
  Winding up petition - Inter-Corporate Deposit outstanding - Held that:- Referring to communication dated 08.08.2012 sent by the petitioner in response to which the respondents on 04.03.2013 despatched a Confirmation of Ledger Account showing the outstanding balance as per the books of accounts of the respondents for the financial years 2009-10, 201011, 2011-12, 2012-13. The last ledger account indicated the balance amount payable to the petitioner is ₹ 63,43,965/- as on 31.03.2013. As the respondents continued to default, the petitioner sent a legal notice on 14.08.2015. Accordingly, I admit the present petition. The Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing.

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• 2018 (11) TMI 246
  Winding up petition - Inter-Corporate Deposit outstanding - Held that:- Referring to communication dated 08.08.2012 sent by the petitioner in response to which the respondents on 04.03.2013 despatched a Confirmation of Ledger Account showing the outstanding balance as per the books of accounts of the respondents for the financial years 2009-10, 201011, 2011-12, 2012-13. The last ledger account indicated the balance amount payable to the petitioner is ₹ 63,43,965/- as on 31.03.2013. As the respondents continued to default, the petitioner sent a legal notice on 14.08.2015. Accordingly, I admit the present petition. The Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing.

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• Insolvency & Bankruptcy

• 2018 (11) TMI 251
  Corporate insolvency procedure - non implement of the ‘resolution plan’ with amendments - Main grievance was that the appellant – ‘SREI Infrastructure Finance Ltd.’ has not been treated equally with other ‘Financial Creditors’ - Held that:- As ‘successful resolution applicant – Ghanshyam Misra & sons Pvt. Ltd.’ and the learned counsel appearing on behalf of the ‘Committee of Creditors’ have no objection if the ‘resolution plan’ is modified to the extent above. In the circumstances, we modify the ‘resolution plan’ as approved by the Adjudicating Authority so far it relates to the payment of amount to the appellant – ‘SREI Infrastructure Finance Limited’ who will be entitled the amount already proposed in the ‘resolution plan’ plus(+) additional differential amount of ₹ 94 Lakhs, as stated in the affidavit, on the same terms & conditions as proposed in the ‘resolution plan’. We allow the parties to implement the ‘resolution plan’ with amendments as shown above and to make payments. So far as ‘IFCI Bank’ is concerned, they had not raised any objection before the Adjudicating Authority and having voted in the favour of the ‘resolution plan’, we are not granting any relief to the Respondent ‘IFCI Bank’.

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• 2018 (11) TMI 250
  Corporate Insolvency Resolution Process (CIRP) - Adjudicating Authority declined to pass an order of restraint upon the Respondents from continuing with the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, negotiating with any other bidder and/or approving any Resolution Plan till the pendency of application - Appellant to be treated as related party - Held that:- The issue of Appellant being in control of DCHL by virtue of holding more than 20 per cent shares and thereby attracting ineligibility as a 'related party' was involved in DCHL matter. Determination of the question as to whether the Appellant held 24.6% shareholding in DCHL at the relevant time thereby attracting ineligibility in terms of provisions of Section 29A of I&B Code is relevant notwithstanding the fact that R-9 was not a party to the DCHL matter. The finding recorded in DCHL matter in regard to status of Appellant as a 'related party' qua DCHL stands dislodged in appeal. The edifice upon which rested the plea of R-9 in regard to alleged ineligibility of Appellant stands demolished. It is not in controversy that the judgment rendered by this Appellate Tribunal in appeal stands unassailed and has attained finality. In view of the same the finding in appeal that the Appellant was not a related party of DCHL would be binding though it may liberally not fall within the contours of 'Res Judicata'. The Appellant came to be held as ineligible on the strength of order passed by Adjudicating Authority (National Company Law Tribunal) Hyderabad Bench on 16.11.2017 paving way for approval of Resolution Plan submitted by R-9 who figured as H-2 Bidder. Since the allegation in regard to ineligibility of the Appellant was founded upon the order passed by Adjudicating Authority, Hyderabad Bench in DCHL matter which has since been reversed by this Appellate Tribunal, it would not be open to R-9 to insist on fresh consideration in regard to the issue of ineligibility of Appellant, which was based solely on order passed in DCHL matter. Corporate Insolvency Resolution Process being a time bound exercise, would not allow such indulgence. The legal impediment in the form of ineligibility alleged against the Appellant having been removed by process of law, the BPSL Resolution Plan pending approval before the Adjudicating Authority under Section 31(1) of the I&B Code no more survives for consideration. The Resolution Professional shall now be required to place the Resolution Plan submitted by the Appellant and approved by the CoC before the Adjudicating Authority for its approval in terms of provisions of Section 30(6) of the Code. The Adjudicating Authority shall accord consideration thereto in accordance with law except for the issue in regard to eligibility of Appellant as a Resolution Applicant which stands settled. The appeal is allowed in the aforesaid terms. Since the extended period of 270 days for conclusion of the Corporate Insolvency Resolution Process has expired on 18th May, 2018, the period for which this appeal has remained pending shall be excluded. The Resolution Professional is granted seven days' time from date of pronouncement of this judgment to submit the resolution plan of Appellant as approved by CoC, before the Adjudicating Authority for approval.

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• 2018 (11) TMI 249
  Corporate Insolvency Resolution Process - approval by resolution by 100% - modified Resolution Plan - Held that:- A modified Resolution Plan was filed on 17/9/2018 along with the original affidavit under section 29A of the I & B Code, 2016 of the Resolution Applicant and Form 'H'. On a screening of Form H it is understood that the Resolution Applicant has complied with the direction, and submitted the modified Resolution Plan. The modified Resolution Plan is in compliance of the provisions of the Code and Regulations which provides provisions for implementation and supervision of the Resolution Plan as well as provisions for the payment of debt to the various stakeholders and to the workmen. Clause 7 of Form 'H' dealt with the distribution of amount provided for the stakeholders under the Resolution Plan. The distribution among the stakeholders not at all under challenge from any corner and therefore, the Resolution Plan, which has been approved by vote share of 100% by the Committee of Creditors in compliance of the provisions of the Code and Regulations and confirms to all the requirements as has been specified in the I & B Code, 2016 is liable to be approved

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• PMLA

• 2018 (11) TMI 238
  Offence under PMLA - attachment orders - seizure of jewelry and utensils - Held that:- The Adjudicating Authority has simply based his finding on non appearance of the appellants before the ED had ignored the vital facts reiterated in the Court Room that the appellants have been appearing before the ED since long but the ED has not to recorded their statements. The appellants had explained many time that they live in the joint family headed by their father and the jewelry and utensil seized were STRI DHAN of three married ladies in the house and a few of their father generated in course of time out of his life long earnings. The ladies had also placed their claims before the Adjudicating Authority by letter dated 16.01.2016. The impugned PAO has been issued by Shri J P Singh, Adhoc Joint Commissioner. It is an admitted fact that all powers flows from the Director. The Director of the ED himself requested CBI to initiate enquiry in the matter. No report before the Magistrate under Section 173 against the appellants. In the charge sheet of 2013 the appellants were not arrayed as accused. It is also informed this tribunal that no PMLA complaint has been filed against the appellants. The prescribed period already expired. Even, on merit no case beyond any doubt even prima facie is established by producing any cogent and clear evidence. Only on the basis of the statement of alleged accused witnesses, the properties were attached. There is no independent evidences. The statement of other accused has no value unless independent evidence implicating the appellant are produced. Since, in the charge-sheet the appellant the appellants were not arrayed as accused for schedule offence as well as PMLA complaint. The prayer of the appeals are liable to be allowed. Thus, the impugned order and the provisional attachment order against the appellants is quashed. The attached properties are released forthwith. The finding arrived in these appeals shall have no bearing with regard to other parties if they are involved.

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• Service Tax

• 2018 (11) TMI 236
  GTA service or not - transportation of sugar cane, gunny bales, machinery parts, urea, sulphur etc. - reverse charge mechanism - whether or not the appellant is liable to pay service tax on GTA services? - Held that:- There is nothing on record to show that no consignment note was issued - Issue of consignment note is an essential requirement for levy of service tax on GTA services. Even in the grounds of appeal, there is nothing asserting that no consignment notes were issued in this particular case. Therefore, there is no reason to hold that service tax on GTA services is not payable in this case. As far as exemption notification 34/2004 is concerned, there is nothing on record to show that appellant is entitled to the benefit of this exemption notification. Appeal dismissed - decided against appellant.

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• 2018 (11) TMI 235
  Issuance of consignment notes - GTA Services - non-payment of service tax on transportation charges paid for procurement of husk - Whether any consignment notes were issued by individual transporters or otherwise? - Held that:- In this particular case, a specific assertion has been made before this Bench in the grounds of appeal that no consignment notes were issued. It is also not clear from the Order-in-Original whether the consignment note was issued in this case or otherwise. If no consignment note is issued, the present case automatically gets excluded from the definition of GTA services by virtue of definition itself and no service tax is to be paid, else service tax is payable. This is a fit case to be remanded back to the original authority to examine whether any consignment notes by whatever name called, were issued by the truck operators - appeal allowed by way of remand.

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• 2018 (11) TMI 234
  Levy of Service tax - user development fee (UDF) - airport services - Build Own Operate Transfer scheme (BOOT) - rejection of refund claim - It is the case of the Revenue in the show cause notice that this user development fees is towards enhancement of various facilities and amenities to the passengers, service to be rendered while, it is the case of the appellant that user development fees is not towards any specific services that are to be rendered to any passenger embarking from the international airport at Hyderabad - Difference of opinion - matter refereed to third bench. The following difference of opinion arising in this appeal needs to be referred to a 3rd member for resolving the issue: Whether user development fee charged by the appellant in the case in hand, is taxable under the Finance Act, 1994 under the head of airport services as held by the Hon ble Member (Technical) or not to be taxed as held by the Hon ble Member (Judicial)?

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• 2018 (11) TMI 233
  Levy of service tax or VAT/Sales tax - supply of SIM cards in the course of rendering services - telecommunication services - composite transaction - N/N. 12/2003-ST - appellant submitted that the SIM cards are sold as goods independent of any service element, hence VAT has been correctly paid by them - extended period of limitation - penalty - adjustment of the VAT paid towards the demand for Service Tax. Whether the value of SIM sold by the Appellants as an independent commodity be included in the assessable value of the taxable service under Section 65 (105)(zzzx) of the Finance Act, 1994 for the purpose of levy of service tax? Held that:- The SIM Cards purchased by the Appellants from the vendors/ suppliers/ manufacturers of SIM card and those supplied by them are distinct. The ones procured by them are not mapped to their network and are capable of being programmed and mapped to any network. However the SIM’s provided by the Appellant are programmed and mapped tow their network. Thus these SIM cards are now the part of the telecommunication network of the appellants and after activation are for the purpose of identifying the subscriber on their network so that he can make or receive the call through their network. Thus the claim of the appellant that the sale of SIM card by the appellant is an independent transaction of sale of goods simplicitor is not tenable, because the same SIM cannot be used for any other purpose other than identifying the consumer on appellants network for provision of telecommunication services. The real test laid down by the Apex Court in the case of IDEA MOBILE COMMUNICATION LTD. VERSUS CCE. & C., COCHIN [2011 (8) TMI 3 - SUPREME COURT OF INDIA] is not vis a vis the transfer of SIM or the property in SIM, but the nature of use of the SIM. If the SIM is used for identification of the consumer on network of the mobile operator, then provisioning of SIM is incidental to the service being provided by the operator - there are no merit in the submissions made by the Appellant in respect of non inclusion of the value of SIM in the services provided by them. Benefit of the N/N. 12/2003-ST - Held that:- The SIM as programmed and provided by the Appellant to the consumer is always the part of the tele-communication network of the appellant and has no other use other than to identify the consumer on the said network. Since the property in the said SIM in effect is not transferred to the consumer, and the said SIM is only used for activation, identification and provisioning of the telecommunication services to the consumer, the transaction in SIM cannot be said to be one of sale of goods - The supply of SIM cards is integral with provision of the taxable service and without the said SIM cards the provisioning of this taxable service is impossible - benefit of N/N. 12/2003-ST cannot be extended to appellant. Extended period of limitation - Held that:- The act of appellant declaring on the CAF that property in the SIM Card is transferred is nothing but an act of misdeclaration, as the property in the part of the mobile network used to identify the consumer on network, their credit and other details, is always with the appellants and not transferred. In fact even the right to use the said SIM also is not being transferred. Hence by mis-declaring the same on same on CAF, appellants have claimed transaction in SIM cards as that of independent sale and thus suppressed the value of services provided by them - extended period rightly invoked. Penalty - Held that:- The appellants have suppressed the facts with intention to evade payment of taxes penalty under Section 78 is justified against them. Demand of interest u/s 75 of FA - Held that:- Demand of interest is a natural consequence on account of delay in payment of the tax. Since appellants have short paid the tax, interest is demandable from them under Section 75 of the Finance Act, 1994 - demand of interest upheld. Adjustment of the VAT paid towards the demand for Service Tax - Held that:- We are not in position to permit or allow for such adjustment or uphold such contention. VAT is levied under the State Act and Service Tax under the Central Act. Since both the authorities, under which Service Tax and VAT are levied are not the same, the tribunal being creature of the Central Act, would not be in position to determine such transfer and adjustment of VAT paid under State Act, towards the tax liability under a Central Act. The demand of service tax needs to be recomputed after taking into account the service tax already paid by them. Since Commissioner has in his order not considered the said documents and the service tax already paid by the appellants in respect of these transactions, the matter will have to be remanded back for re-quantification of the demand of service tax. Appeal allowed by way of remand.

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• 2018 (11) TMI 232
  Valuation - includibility - value of SIM supplied by the Appellant for activation and providing the mobile telephony services to its customer - benefit of N/N. 12/2003-ST - benefit of cum tax price - demand of interest - penalty u/s 76 and 78 - adjustment of VAT paid on sale of SIM to its consumers. Whether the value of SIM supplied by the Appellant for activation and providing the mobile telephony services to its customer includible in taxable value of services provided by him? - Held that:- The issue is decided by apex court in the case of BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT], where it was held that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers - thus, if SIM Cards are sold then their value can t be included in the value of the service and no service tax can be charged. If the value of such SIM s is includible in the taxable value of the services provided by them whether the benefit of exemption under notification No 12/2003-ST can be extended to them - Held that:- The supply of SIM cards is integral with provision of the taxable service and without the said SIM cards the provisioning of this taxable service is impossible. Accordingly the benefit of Notification No 12/2003-ST cannot be extended to the Appellants. Whether the benefit of cum tax price needs to be extended to the appellant for determining the service tax leviable? - Held that:- Hon ble Supreme Court has in the case Dugar Tetenal Ltd [2008 (3) TMI 50 - SUPREME COURT] has held in favor of allowing such benefit. Whether interest is demandable and recoverable from the appellants? - Held that:- The interest is compensatory in nature and is required to be paid by the tax payer in case of any default in payment of tax for the period of default - demand of interest upheld. Whether in facts and circumstances of this case penalty under Section 76 and Section 78 of the Finance Act, 1994 are justified? - Held that:- Penalty under Section 76 is for the delay in payment of service tax - penalties imposed under Section 76 of the Finance Act, 1994 are justified - Since the penalties imposed under Section 76 are upheld, we do not find justification in separate penalties imposed under Section 78. Whether the adjustment of VAT paid on sale of SIM to its consumers is allowed? - Held that:- We are not in position to permit or allow for such adjustment or uphold such contention. VAT is levied under the State Act and Service Tax under the Central Act. Since both the authorities, under which Service Tax and VAT are levied are not the same, the tribunal being creature of the Central Act, would not be in position to determine such transfer and adjustment of VAT paid under State Act, towards the tax liability under a Central Act. Appeal disposed off.

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• 2018 (11) TMI 231
  Refund of service tax paid - rejection of refund on the ground of time limitation - section 11B of Central Excise Act 1944 - Held that:- In a similar issue in respect of appellant s own case, view has been taken by the Bench (wherein one of us Shri M.V. Ravindran was also a Member) relying upon the judgment of Hon ble High Court of Bombay in the case of Parijat Construction [2017 (10) TMI 659 - BOMBAY HIGH COURT]. The Larger Bench decision of Veer Overseas [2018 (4) TMI 910 - CESTAT CHANDIGARH] has not agreed with the judgment of Bombay High Court as to non-applicability of time limit prescribed under 11-B of Central Excise Act, 1944 to the refund of an amount not payable as tax. It is a well settled law that the judgment of Hon ble High Court is to be preferred against any judgment of the decision of Tribunal. This law was settled by a five member Bench of the Tribunal in the case of Khanbhai Esoofbhai vs. Collector of Central Excise, Calcutta [1998 (11) TMI 141 - CEGAT, NEW DELHI]. The decision relied upon by the Revenue, more specifically the Larger Bench decision, may not carry the case further - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 230
  CENVAT Credit - Non-payment of duty @ 6%/7% of the trading value - non-maintenance of separate dutiable and exempted accounts to avail CENVAT credit - Rule 6 of CCR 2004 - Bonafide belief - Demand based on audit objections - Held that:- It is apparently clear that a pure sale, un-associated with delivery of goods and services together, is not to be considered as service. Therefore what is contained in Section 66D of the Finance Act, 1994 dealing with negative list of services concerning trading of goods and the clarificatory circular referred above as well as inclusion of the same in the explanation appended to clause 2(e) of the Cenvat Credit Rules 2004 are mere clarificatory in nature since definition of service as contained in 65B(44) and exempted service in 66D are to be read conjointly and not in exclusion of each other - sale of goods-be it made in the high sea or within the territorial boundary of India in which Finance Act, 1994 has its force, cannot be called a service to impose tax liability or deny the credit under Rule 6 of Cenvat Credit Rules. Extended period and penalty - Held that:- Respondent has not brought forth any cogent evidence on record to establish the charge of wilful suppression by the appellant company to invoke extended period of service so as to justify penalty. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 229
  Classification of services - providing services like cleaning activity services’, civil work in plant area, material handling, support services in I.T. department, quantity survey in plant area, water supplies service etc. - Business Auxiliary Services or not? - Held that:- The bare perusal of this provision makes it clear that any activity solely for the purpose promotion of business or marketing or sale of goods related to the business and any other such activity which is directly meant for the promotion of the business can only be categorized as the ‘business auxiliary services’ - From the show cause notice it is observed that the only proposition of the department is for the impugned services to be called as ‘business auxiliary services’. It is the settled law that the department cannot go beyond the scope of the show cause notice. Once the service cannot be categorized as ‘business auxiliary service’, there remains no question of demand irrespective assessee is liable for any other classification of his activity. Appeal dismissed - decided against appellant.

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• 2018 (11) TMI 228
  Valuation - inclusion - receiving certain materials free of cost, such as, cement, rods etc, which were to be used by the appellant in the construction works - N/N. 15/2004-ST dated 10.09.2004 - Revenue was of the view that the value of materials supplied free of cost, should also be included in the gross amount charged since such materials have been used in the provision of service - benefit of abatement of 67%. Held that:- The present issue came before the Larger Bench of the Tribunal in the case of Bhayana Builders Pvt. Ltd. Vs. Commissioner of Service Tax, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)]. The Larger Bench decided that the gross amount charged cannot include the value of free supplied materials provided by the receiver of the service - thus, there is no justification for including the value of free supplied materials while determining the gross amount charged for the purpose of benefit of Notification No.15/04-ST ibid as amended. Consequently, there is no justification for the demand of service tax. The demand of interest as well as penalties imposed under various Sections of the Finance Act, 1994, are set aside - demand of service tax is already paid and is upheld - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 227
  Liability of service tax - payments made to foreign associates for services procured from them - reverse charge mechanism - Revenue was of the opinion that the respondent has received various services from persons situated outside India - Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 read with Rule 2(1)(d)(iv) of the said Rules. Held that:- The Finance Act, 1994 was amended to include the provision of Section 66A specifically providing for such a scenario - the service tax liability on taxable services provided by a person located outside India to a recipient in India would arise only w.e.f. 18.04.2006 i.e. the date of enactment of Section 66A ibid - there is no infirmity in the order passed by the lower authority in dropping the demand for service tax up to 17.04.2006. Service rendered during the period 18.04.2006 to 31.03.2007 - Held that:- Sub-rule 3(i) & 3(ii) does not appear to have any application in relations to services in dispute. But it is required to be examined whether the services rendered by the foreign associates during the period would qualify under sub-rule 3(iii). It needs to be determined whether respondent is the recipient of such services though there is no dispute that such services have been rendered abroad and the payments for such services have been made by the respondent to the foreign service providers. The matter is required to be remitted back to the adjudicating authority for redetermination of the demand - appeal allowed by way of remand.

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• 2018 (11) TMI 226
  Business Auxiliary Service - Works contract - Revenue s case is that in the contracts, the transportation charges and other charges are shown separately. Therefore, the appellants are providing separate services, which are chargeable to service tax - Held that:- The activities carried out in terms of Work Order dated 24.09.2003 as well as 13.04.2005 are similar and involved raising of mined ore from the mining area and loading and transporting of the same upto the Dock Yard. From the perusal of the Work Order and the description of work, it is evident that the activities are essentially for mining of iron ore and certain ancillary services in relation to the mining. Mining has been incorporated as a separate service only w.e.f. 01.06.2007 when the separate category has been created under Section 65 (105)(zzza) - The demand raised against the services are for a period prior to 01.06.2007 and hence, the demand for service tax cannot be sustained. The activities covered under Work Order dated 24.02.2005 are entirely of a different type. The description of Work Order as mentioned is for hiring of Heavy Earth Moving Machinery for development of iron mines as per the scope of the work and other terms and conditions. A perusal of relevant Work Order reveals that the scope of work is not only hiring of heavy machinery - The job undertaken by the appellant as per Contract is Site Formation, which included specific loading and Dumping. As such, Contract is not for mining - demand upheld under Site Formation Service. Penalty will apply proportionately. Appeal allowed in part.

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• 2018 (11) TMI 225
  Valuation - Commercial or Industrial Construction Services - inclusion of FOC material while claiming abatement of 67% as provided under N/N. 15/04-ST or N/N. 1/2006-ST dated 01.03.2006 - whether the value of construction material as provided free by M/s.NTPC (the service recipient) to M/s. NBCC (the service provider) for the purpose of providing services under the category of commercial or industrial construction services is required to be added in the value of the services or not? Held that:- After the amendment, Section 67 of the Act says that where the service tax is chargeable on any taxable service with reference to its value, then such value shall in a case when the provision of service is for consideration in money be the gross-amount charged by the service provider for such service. (as is mentioned in sub-clause (i) thereof). However, as per sub-clause (ii) thereof where provision of service is for a consideration not wholly or partly consisting of money, the value shall be such amount in money as with addition to service tax charged is equivalent to consideration and where the provision of service is for consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. Thus, after the amendment in Section 67 of the Act the explanation thereof purports to define the expressions “consideration” “money” and “gross amount charged”. Such material provided by the service recipient is to be used for service recipient only. Hence no benefit has accrued to the service provider due to the said free construction material. Therefore, we are of the opinion that the said construction material would not constitute a non-monetary consideration - Thus, gross amount charged shall include the construction material if and only if some value is charged for the same. Hence, the construction material supplied by the service recipient free of cost, the amount thereof is not the gross amount taxable value as not being charged. However, for the construction material (may be minor) as used by the service provider i.e. the appellant he is liable to take the benefit of this Notification. The adjudicating authority has committed an error while interpreting the provisions qua valuation of the taxable service and has also committed an error while ignoring the settled principle of law rather has relied upon the over ruled decision. The findings are therefore liable to be set aside. Time Limitation - Held that:- Burden of proof of proving malafide conduct under the proviso to Section 28 of the Act lies with the Revenue that in furtherance of the furtherance of the same specific averments should find mention in the SCN, which is the mandatory requirement for commencement of the action under the said proviso, and where nothing on record displays a wilful default on the part of the assessee, extended period of limitation under the said provision couldn’t be invoked against the assessee - the impugned SCN as being barred by time. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (11) TMI 224
  Penalty u/r 25 of CER - no justification given for penalty - Held that:- Admittedly, there is no allegation that the assessee removed excisable goods in contravention of the provisions of the Rules. Therefore, Sub-Clause (a) of Rule 25(1) would not be attracted. The record of the proceedings shows that the assessee had accounted for the excisable goods. Therefore, contingency contemplated in Clause (b) of Rule 25(1) of the Rules also will not be attracted. As the assessee possesses a registration certificate, Clause (c) of Rule 25(1) cannot be invoked. Thus, the Revenue, to sustain the penalty, should bring the case of the assessee under Clause (d) of Rule 25(1) of the Rules, where they could show that the assessee contravened the provisions of the Rules with intent to evade payment of duty - Admittedly, the Tribunal while passing the impugned order did not give any reason as to why the penalty of ₹ 5,00,000/- should be confirmed. Penalty set aside - appeal allowed - decided in favor of assessee.

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• 2018 (11) TMI 223
  Liability of Interest and penalty - credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015 - Held that:- The facts was very much in the knowledge of the Revenue. Therefore, there is no suppression of fact on the part of the appellant, accordingly, the penalty imposed under Section 11AC is not imposable. Demand of Interest - Held that:- If at all, there is availment of wrong credit w.e.f 01.03.2015 only, however, from 01.03.2015 till the reversal of the credits the appellant have not utilized the said amount. As per the amended Rule 14 w.e.f. 01.03.2015, the interest is chargeable for the act of wrong availment of credit only when the assessee wrongly availed and utilized the cenvat credit - In the present case the credit of Education Cess and Secondary & Higher Education Cess was subsumed in the opening balance of March 2015. Since till the date of reversal, it was not utilized, therefore, the interest is not chargeable - interest demand set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 222
  CENVAT Credit - capital goods - steel items viz. HR Coils, Sheets, Joists, MS Channels, MS Flats, MS Angles, etc., in the Sugar Plant Machinery to erect Molasses Tank-II - denial of credit on the ground that appellant had not produced any authentic record to prove that the steel items were meant only for the construction of Molasses Tank and not otherwise - Held that:- Undoubtedly, the courts have held that the HR Coils, Sheets, Joists, MS Channels, MS Flats, MS Angles, etc., used in the fabrication of Capital Goods are eligible for CENVAT Credit. It is also an admitted position of law that “Capital Goods” as defined under Rule 2(a) ibid. includes even a storage tank also. In this view of the matter, the only exercise that needs to be undertaken by the appellant is to establish that the above steel items were in fact used in the construction/erection of Molasses Tank-II. There are no finding or observation on any of the documents including the certificate of the Chartered Engineer. It is also a fact that in the very foundation, i.e., Show Cause Notice itself, the adjudicating authority had assumed that the above steel items were used in the fabrication of Molasses Tank. Thus, the certificate of Chartered Engineer would only support this. The matter needs to be re-looked into by the adjudicating authority who shall give a finding after considering all such necessary documents including the certificate - appeal allowed by way of remand.

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• 2018 (11) TMI 221
  CENVAT Credit - Captive consumption of industrial valves - demand of Excise duty - N/N. 67/95-CE - demand on the ground that clearances to Mega Power Project is not provided as an exemption in the proviso to the N/N. 67/95-CE - Held that:- The issue involved in this case is no more res integra as the same has already been considered and laid to rest by this very Bench of the CESTAT in the appellant’s own case for an earlier period [2018 (10) TMI 1541 - CESTAT CHENNAI], where reliance placed in the case of Bharat Aluminium Co.Ltd. Vs CCE Raipur [2017 (4) TMI 276 - CESTAT NEW DELHI], where it was held that, the exclusion made under sub-clause (vii) of sub-rule (6) of Rule 6 of CCR, 2004 read with proviso to N/N. 67/95 makes it clear that the exemption for captive consumption of intermediate products has been correctly claimed by the appellant in the present case - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 220
  Demand of Central excise duty - demand on the ground that activity amounting to manufacture which was exempted under Clause (c) of Sl. No. 30 of N/N. 25/2012-ST - assessing officer without going in to matter in detail passed the order - principles of natural justice - Held that:- The assessing officer cannot conclude a proceeding based on his assumptions or presumptions; he has to weigh each case on the facts unearthed as a result of investigation. When there are allegations and counter-allegations, it is expected that a further investigation be done, to unearth the real facts. The assessing officer without any reference to any further investigation and by simply relying on the invoice which did not even specify whether they are manufacturing those items for the assessee alone, has concluded the proceedings to hold it against the assessee. It is a settled position of law that the jurisdiction of the Central Excise authorities is specific and equally so when it comes to the questioning of correctness, legality or otherwise of the tax paid by the service providers, by the Central Excise Officers having jurisdiction over the service recipients/assessees availing the credit. Demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 219
  Refund of Excise Duty paid mistakenly - appellant have paid an amount of 6% of the assessable value; that the goods were exempted from Customs Duty - rejection of refund on the ground that the excess amount paid by the appellant in terms of Rule 6(3)(i) of the CENVAT Credit Rules, 2004 was not unconstitutional - Held that:- The Revenue has time and again changed its stand without being consistent in each stage, just to deny refund nor has the Revenue justified issuance of a second Show Cause Notice when what was required was to give effect to direction of Commissioner (Appeals). The appellant’s refund application in Form-R filed in 2014 having not been specifically found to be wrong and the Revenue having accepted the directions of the Commissioner (Appeals) cannot be found to go beyond the directions therein and hence, the rejection of refund for any other ground is unsustainable being contrary to law. Refund allowed - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 218
  CENVAT Credit - Compounded levy scheme - N/N. 17/2007-CE dated 01/03/2007 - whether the appellant’s final product manufactured prior to 01/03/2014 as lying in stock, when they opted for compounded levy scheme would attract rate of duty applicable prior to the said date or post the said date? Held that:- Admittedly, at the time of the clearance of the goods the appellant was working under the compounded levy scheme and has paid the duty on the said stock in terms of the said scheme - when earlier the assessee shifted from compounded levy scheme to Cenvat Credit scheme, the stock of the goods manufactured during the period of compounded levy scheme was cleared by them at the tariff rates. They have adopted the same pattern while moving back to the compounded levy scheme. The issue is no more res integra and stands settled by the Hon’ble Supreme Court in the case of Wallace Flour Mills Company Ltd. V/s Collector of C. Ex [1989 (9) TMI 106 - SUPREME COURT OF INDIA] wherein it was held that the rate of duty applicable to the excisable products would be the rate applicable on the date of clearance of the goods. The clearance of the said goods under compounded levy scheme payments are proper and appropriate - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 217
  CENVAT Credit - input services - outdoor catering service - outward transportation service - rent-a-cab service. Outdoor catering service - N/N. 03/2011-CE dated 01.03.2011 - Held that:- Larger Bench of this Tribunal in the case of Wipro Ltd Vs. CCE, [2018 (4) TMI 149 - CESTAT BANGALORE] has held that outdoor catering service is not an input service after the amendment from 01.04.2011 - denial of credit upheld. Freight outward charges - denial on the ground that the Joint Commissioner found that the invoices submitted on the credit was availed on transportation of export cargo up to the place of destination i.e. outside Indian Territory - Held that:- The case of the appellant is that he has claimed outward transportation up to the Port of export and has not claimed beyond the Port of loading and the Commissioner (A) has wrongly relied upon the Order-in-Original which is based upon the observation of the Joint Commissioner that in the invoices, the appellant has claimed CENVAT credit on transportation up to the place of destination whereas, in fact, the appellant has only claimed CENVAT credit on transportation up to the Port which is a place of removal in case of export - case needs to be remanded back to the original authority for the purpose of verifying whether the appellant has claimed CENVAT credit on freight outward up to the place of the Port or beyond. Appeal allowed by way of remand.

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• 2018 (11) TMI 216
  Valuation - goods cleared from the factory but sold through consignment agents - applicability of Rule 7 of the Central Excise Valuation (Determination of price of Excisable goods) Rules, 2000 - period August, 2004 to May, 2005 - Held that:- In terms of Rule, 7 ibid, we are of the view that there is no mandate for adopting the valuation as has been adopted by the Lower Authorities - Identical issue decided in the case of E. I. Du Pont India Pvt. Ltd. Vs. CCE, Chennai [2004 (10) TMI 481 - CESTAT, NEW DELHI], where it was held that Once the normal transaction value of the impugned goods sold from other place at or about the same time is ascertainable, there is no need to determine the assessable value on the basis of price at which the goods may be sold subsequent to the time of removal of goods - valuation issue need not be interfered. Penalty - Held that:- The penalties are upheld, but quantum reduced. Appeal allowed in part.

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• 2018 (11) TMI 215
  Refund of the duty paid on aluminium products including aluminium dross - Area Based exemption availed - It was viewed by Revenue that since no duty was payable at the time of clearance of aluminium dross, no refund will also be payable in terms of area based exemption notification. Held that:- The intention of the Government in coming out with the area based exemption notification is to promote industrialization of the area. The Notification grants exemption to the specified goods manufactured within the designated area ; but such exemption has been operational through the refund mechanism. The CBEC Circular No.682/73/2002-CX dated 19.12.2002 has clarified that the refund paid under the area based exemption notification, is not the result of any excess payment of duty attracting Section 11B of the Act, but is a way of operation of the benefit of area based exemption. The appellant cannot be defaulted for making payment of duty on aluminium dross, especially since the appellant has been availing benefit of the same Notification for a long time and has been receiving periodical refunds - the appellant was not required to pay duty on aluminium dross in the light of the pronouncement of law by the Apex Court. But keeping in view the purpose of Notification, it can be inferred that once duty is paid, the refund cannot be denied to them. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (11) TMI 214
  Estimation of sales turnover - Demand on the basis of electricity consumption - Whether after accepting the principle that electricity consumption could not form the basis of making best judgment assessment the tribunal could have denied the consequential relief to the assessee by noticing variation in monthly consumption of electricity? - Held that:- While the quantum of enhancement may not be interfered with in revisional jurisdiction on an appraisal of facts and evidence, however, where the principle of law stands well settled the taxing authorities and appellate authorities have to accept the same and apply it with clarity and consistency in all assessment proceedings and not to seek or make variations contrary to the principle unless necessary distinguishing facts or circumstances are shown to exist to justify departure from the principle. In the facts of this case, in absence of any material either in the shape of excise documents or other material to establish suppression of turnover, no part of the enhancement could have been sustained on account of the fluctuations in electricity consumption as that would be contrary to the principle itself. In absence of unexplained or glaring excess consumption of electricity or any corroborative material to support the enhancement of turnover, the enhancement sustained by the Tribunal has no legs to stand. Revision allowed - decided in favor of assessee.

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• Indian Laws

• 2018 (11) TMI 237
  Dishonor of Cheque - recovery of loan - Section 138 of Negotiable Instruments Act - acquittal of accused - Held that:- The issuance of Ex.P1-cheque by the accused and his signature therein are admitted by him. When the accused pleaded that he had not issued the cheque (Ex.P1) for repayment of the loan amount borrowed, it is the bounden duty of the accused to prove the same by way of preponderance of evidence - In this case, the initial burden lies on the accused, however, he has failed to do so. As recorded by the trial Court, the accused has not examined himself as witness. It is settled that Sections 138 and 139 of the N.I. Act introduced exceptions to the general rule as to the burden of proof in criminal cases and shifted the onus on the accused. Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the Court "may presume" a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt - It is also settled that the accused had to prove in the trial by leading cogent evidence that there was no debt or liability and that the accused not having led any evidence could not be said to have discharged the burden cast on him. Existence of legally recoverable debt or liability is a matter of presumption under Section 139 of the N.I. Act. Since issuance of Ex.P1-cheque by the accused and his signature therein are admitted by the accused and the complainant has proved his case by way of preponderance of evidence to show that Ex.P1-cheque returned with an endorsement funds insufficient, it is to be held that the complainant has proved his case and that the lower appellate Court went wrong in setting aside the judgment of the trial Court, which is a well founded - the acquittal of the accused by the lower appellate Court deserves interference. The judgment of the trial Court in C.C.No.715 of 2005, dated 03.7.2007 on the file of the learned Judicial Magistrate No.II, Salem is restored - appeal allowed.

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