Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 8, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Collection of tax at source by Tea Board of India – determination of value - collection of TCS from the sellers (i.e. tea producers) and collection of TCS from the auctioneers
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Scope of principal and agent relationship under Schedule I of CGST Act, 2017 in the context of del-credere agent (DCA) - CBIC clarifies three issues.
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Levy of GST - Valuation - applicant is not pure agent - Toll charges paid are not to be excluded from the value of supply under Rule 33. GST shall on the entire value of the supply, including toll charges paid.
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Educational Institution or not - introduction of the IIM Act wef 31/01/2018 - The Applicant is an ‘educational institution’ - Benefit of exemption is available to the applicant.
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Levy of GST - food supplied to SEZ area to employees of company - employees can neither be treated as SEZ developer nor as SEZ unit - Benefit of Zero rated supply not available.
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Detention of goods with vehicle - delay in transporting the consignment after filing E-way bill due to flood - revenue ought to have taken a lenient view-rather a practical view.
Income Tax
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TDS u/s 195 - grossing up - the obligation to pay the tax is on the recipient and since the assessee in terms of the agreement agreed to pay the taxes, the same has to be necessarily added to the income of the recipient and therefore, the principle of grossing up has to be applied.
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Loss sustained in business is not allowed to be set off against betting and gambling income - The total winnings from betting of the assessee should be brought to tax @40% u/s 115BB
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Non issue of Form No.16 to salaried employees employed by Companies and Corporations - Department of Income Tax directed to penalise such defaulters and take other strict measures contemplated by law against them.
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Nature of receipt - the compensation received by the assessee is for sterilization of the profit making apparatus of the assessee company - receipt is capital in nature - not taxable.
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TDS u/s 194C - since the reimbursement bills were separately raised there was no requirement to deduct TDS and disallowance u/s. 40(a)(ia) of the act could not be made in respect of reimbursement bill
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Ad hoc disallowance of expenditure - element of personal use by the directors and employees - without pointing out to any particular discrepancy in the books of accounts of the assessee or without rejecting the books of accounts, such disallowance on estimate basis has no logic behind it and we find it difficult to sustain the same
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Deduction u/s 80IA - only because the assessee could not e-file the form no. 10CCB along with the return of income, the assessee cannot be denied the benefit of section 80IA.
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Non deduction of TDS u/s 195 - CIT(A) has rightly observed that the assessing officer has invoked section 40(a)(ia) in respect of payments made to foreign nationals. For such situation, the correct section would have been section 40(a)(i) and not 40(a)(ia).
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TDS u/s 195 - Since the commission has been paid to nonresident agents for services rendered outside India and the same is not chargeable to tax in India under the Act - Since there is no TDS liability, no disallowance u/s 40(a)(i) can be made.
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Disallowance of Selling and Distribution Expenses - allowable business expense - discounts on purchase of vaccines given to doctors - the present assessee being a pharmaceutical company is outside the scope of the said circulars of MCI and the CBDT
Customs
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Refund of Customs duty paid - valuation - it was legal obligation on the appellant to challenge the order of IGM amendment, if at all they were not satisfied on the issue of valuation - without challenging that order, straightway claiming the refund is clearly pre-mature.
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Export of Non-Basmati Rice or not - restricted item - no test report is available which can reliably certify that the rice under export was Basmati or non-Basmati - the impugned order is presumptive and vague - consequential benefits directed to be granted to the appellant.
PMLA
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Offence under PMLA - Provisional Attachment Order - By making the entire payment, the appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering - Provision order quashed
Service Tax
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Date of effectiveness of service - services of erection of transmission tower at site - this service was not covered under the definition of Erection, Commissioning or Installation prior to 01/05/2006.
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Exemption from service tax - Insurance Plan - benefit of N/N. 3/94-ST - There is no requirement in the notification that the Janta Personal Accident Policy referred to in the notification must be submitted to the IRDF for its approval.
Central Excise
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Long pendency of appeal before tribunal - This delay was only in view of the appeals awaiting its normal turn for consideration - the grievance of delay in disposing of the appeals by the Tribunal has no merits and is not accepted.
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Where at the highest level i.e. at the level of the Central Board of Indirect Taxes and Customs (CBIC), the Revenue has accepted a particular view on a pure question of law, then in all such cases, the Revenue should withdraw the show cause notices and / or pending proceedings.
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Recovery of sanctioned refund claim - rebate was granted under Rule 18 of CER - The appellant was legally entitled for rebate claim even if there is any violation of conditions of Notification No. 96/2009-Cus if any - the order for recovery of the said rebate claim is absolutely illegal and not tenable
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CENVAT Credit - duty paying documents not provided - appellant has not only wrongly taken the credit of Cenvat credit and but also utilised the same, the department has rightly issued the SCN for imposition of interest and confirmed the same.
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Clandestine removal - cross-examination of persons whose statements were relied upon - As per Section 9D, the provisions are clear that, before relying on the statement of witness, it is essential on the part of the Adjudicating Authority to first examine the witness and then only such statement can be relied upon.
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Captive consumption - Benefit of N/N. 67/95 - Pig iron captively for manufacture of other machinery items/parts, which were further used for repair and maintenance of machinery installed in the factory premises - demand set aside on merit as well as on revenue neutral situation.
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Manufacture - process of manufacture of printed plastic pouches and printed laminated plastic films, out of films purchased from the market - printed laminated poly films fall under Tariff Item No.4911 and attract nil rate of duty.
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Clandestine manufacture and removal - the investigation did not establish as to from where the raw material such as tobacco was obtained and to whom the goods were cleared and how the money was recovered out of alleged clandestine clearance of such goods - demand set aside.
VAT
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Vires of Maharashtra Tax on Lotteries Act, 2006 - lottery falls within the purview of betting and therefore, Entry 62 List II is invoked by the State Legislature to enact a law imposing tax on betting and gambling - Maharashtra Tax on Lotteries Act 2006 is well within the legislative competence of the State legislature
Case Laws:
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GST
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2018 (11) TMI 337
Levy of GST - Valuation - Toll Taxes reimbursed by its clients - includibility - reimbursement charges - deduction under Rule 33 from the value of supply, being expenditure incurred as a pure agent - Held that:- The toll is charged for providing the service by way of access to a road or bridge (SAC 9967). The Applicant, being the owner of the vehicles, is the recipient of the service provisioned on payment of toll. The Applicant admittedly is the beneficiary and liable to pay the toll, which is compulsorily levied on the vehicles. The expenses so incurred are, therefore, cost of the service provided to the Banks - Reimbursement of such cost is no disbursement, but merely the recovery of a portion of the value of supply made to the Banks. The Applicant is, therefore, not acting in the capacity of a ‘pure agent’ of the Bank while paying toll charges. Such charges are costs incurred, so that his vehicles can access roads/bridges to provide security services to the recipient - Toll charges paid are not, therefore, to be excluded from the value of supply under Rule 33. GST shall, therefore, be payable at the applicable rate on the entire value of the supply, including toll charges paid. Ruling:- Toll charges paid are not to be excluded from the value of supply under Rule 33. GST shall, therefore, be payable at the applicable rate on the entire value of the supply, including toll charges paid. The Applicant is not acting as a ‘pure agent’ of the Bank while paying toll charges, which are the cost of the service provided to the Banks so that his vehicles can access roads/bridges to provide security services to the recipient.
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2018 (11) TMI 336
Educational Institution or not - introduction of the IIM Act wef 31/01/2018 - eligibility for exemption under Entry No. 66(a) of the Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017 - date of effect of notification - eligibility of refund of tax amount already paid - scope of Section 97(2) of the GST Act. Held that:- The issues that can be taken up by the Authority of Advance Ruling are determined by Section 97(2) of the GST Act. Queries regarding the date of effect of any change in the tax rate and regarding refund are not covered under Section 97(2) of the GST Act - The Authority for Advance Ruling can only take up for consideration the queries related to whether or not the Applicant is an “Educational Institution” and is liable to be exempted under of the Entry No. 66(a) of the Exemption Notification. The IIM Act does not mention any specific degree/diploma/program that can be or shall be undertaken by the Applicant. In absence of such specification, reference should be made to the degrees/programmes recognized and approved by the University Grants Commission Act 1956 (hereinafter referred to as “the UGC Act”) and the All India Council for Technical Education Act, 1987 (hereinafter “the AICTE Act”) that can be lawfully awarded by any higher educational institution in the country. It can be seen that the AICTE Act and the UGC Act are very specific and detailed about the approved courses/programmes under it. Neither of the above-mentioned Act mentions courses like PGPEX-VLM and CES-MIM.. Whether the Applicant should now continue to enjoy Eexemption under Entry no. 67, which has not been deleted even after the IIM Act came into being, or be considered for exemption under Entry no. 66(a) of the Exemption Notification? - Held that:- The Applicant is an “Educational Institution” within the meaning of sub-clause (ii) of clause 2(y) of the Exemption Notification in terms of the IIM Act. Exemption under Entry no. 66(a) is applicable to such educational institutions as such, especially as the law mentions that the qualifications awarded are to be “recognised by any law for the time being in force”. As Entry No. 67 specifically concerns IIMs, courses mentioned therein, will be eligible for Exemption under the specific entry, even if not mentioned elsewhere under any law for the time being in course - the provisions of the law are available to the Applicant. Ruling:- The Applicant is an ‘educational institution’ within the meaning of sub-clause (ii) of clause 2(y) of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017. The Applicant is eligible for benefit for exemption under Entry No. 66(a) of Notification No. 12/2017-CT(Rate) dated 28/06/2017, being an educational institution in terms of clause 2(y) of the said notification.
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2018 (11) TMI 335
Levy of GST - supply of food or drinks or any articles for human consumption - food supplied to SEZ area to employees of company - Zero rated supply or not - rate of GST - running a restaurant in the SEZ area - Held that:- The supply made by the appellant to the employees of the unit located in SEZ cannot be construed as zero rated supply by any stretch of imagination, as the employees can neither be treated as SEZ developer nor as SEZ unit. Accordingly, GST will be applicable as per the classification of the services determined in terms of the scheme of the classification of services as provided under Annexure A to the N/N. 11/2017-C.T. (Rate) dated 28.06.2017 as amended by the N/N. 46/2017-C.T. (Rate) dated 14.11.2017. Running a restaurant in the SEZ area - rate of GST @ 5% or not - Held that:- The food is being cooked at one place and being distributed to the various different locations of the companies with whom they have entered into contract. Thus, this event is not covered under the definition of the “Restaurant services” - the appellant claim that it is running Restaurant Services in the SEZ area is not tenable and hence the GST rate of 5% as envisaged by the appellant is not correct. Ruling:- The services of supplying food by the appellant to the employees of the unit located in the Special Economic Zone is not covered under the zero rated supplies in terms of Section 16(1)(b) of the IGST Act, 2017 and the services of the appellant are also not in the nature of restaurant services as claimed by the appellant.
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2018 (11) TMI 334
Release of detained goods - petitioner contends that when the authorities detained the goods even the very authorities were unaware of the procedure to be adopted - Government Pleader, on the other hand, submits that the authorities have followed the procedure and passed the Ext.P8 order - Held that:- The petitioner can pay the demanded tax and penalty under protest, to got the goods released - petition disposed off.
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2018 (11) TMI 333
Input tax credit - unable to upload FORM GST TRAN-1 within the stipulated time - migration to GST Regime - failure to upload the form due to some system error - Held that:- The Government of India has issued Circular No.39/13/2018-GST, dated 03.04.2018, for setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal. Not only the petitioner but also many other people faced this technical glitch and approached this Court. Both the learned counsel submit that this Court on earlier occasions permitted the petitioners to apply to the Nodal Officer concerned to have the issue resolved - So, here too, the petitioner may apply to the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner s uploading FORM GST TRAN-1, without reference to the time-frame. Petition disposed off.
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2018 (11) TMI 332
Detention of goods - it was alleged that there were no nexus between the documents accompanied and the actual goods under transport - Section 129(3) of the Central/State Goods and Services Tax Act, 2017 - Held that: - Division Bench of this Court, under similar circumstances THE COMMERCIAL TAX OFFICER AND THE INTELLIGENCE INSPECTOR VERSUS MADHU. M.B. [2017 (9) TMI 1044 - KERALA HIGH COURT], disposed off the petition. Besides directing expeditious completion of the adjudication, the Division Bench permitted the release of the goods detained. Petition disposed off directing the competent authority to complete the adjudication under Section 129 of the CGST Act.
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2018 (11) TMI 331
Detention of goods with vehicle - delay in transporting the consignment after filing E-way bill due to flood - Held that:- The petitioner has every document to transport the goods safely, save the expiry of the time prescribed in the e-way bill. It is preposterous to contend that the petitioner delayed the transport deliberately-for no purpose. Granted, I cannot find fault with the authorities in detaining the goods. But once the petitioner has explained the circumstances through Exts.P8 and P8(a), they ought to have taken a lenient view-rather a practical view - the respondents will release the goods after securing personal bond from the petitioner-that is, without insisting on the bank guarantee - petition disposed off.
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Income Tax
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2018 (11) TMI 330
TDS u/s 195 - payments made to a non resident - DTAA between India and UK - income accrued to India - principle of grossing up - Held that:- In the decision in the case of M/s.TVS Motor Company Ltd. Vs. ITO [2018 (9) TMI 81 - MADRAS HIGH COURT], to which, one of us (TSSJ) was a party, this Court decided the substantial question of law against the assessee. In the absence of the definition of “income” and definition of “gross amount” under the treaty, the assessee has to necessarily compute the income in terms of Section 195A of the Act. Admittedly, in the instant case, there is no exemption granted under Section 10(6A) of the Act for the assessee to contend that the said payment does not form part of total income. For the purpose of deduction of tax at source on the payment made by the assessee to the University of Warwick, the income should be computed in terms of the provisions of the Act and in so doing, it shall be increased by taking into consideration the amount of tax liability undertaken to be borne by the assessee. In other words, the obligation to pay the tax is on the University of Warwick and since the assessee in terms of the agreement agreed to pay the taxes, the same has to be necessarily added to the income of the University of Warwick and therefore, the principle of grossing up has to be applied. No hesitation to hold that the Assessing Officer, the CIT(A), and the Tribunal rightly held that the principles of grossing up would apply to the assessee's case.
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2018 (11) TMI 329
Loss sustained in business set off against betting and gambling income - whether only the net income is to be taxed under Section 115BB? - Held that:- Identical question was decided in the assessee's own case against the assessee as held a combined reading of Section 115BB and the proviso to section 58(4) along with the CBDT circular no.721 dated 13.09.1995 fortify the action of the Commissioner (Appeals) and we see no justification to interfere with the orders of the Commissioner (Appeals) on this issue”. We are at a loss to understand as to how the Tribunal concurred with the decision of the Commissioner of Income Tax (Appeals), while making a diametrically opposite observation that Section 58(4) of the Act is not applicable. The total winnings from betting of the assessee should be brought to tax at the rate of 40% as contemplated under Section 115BB of the Act. The order passed by the Tribunal, which affirmed the order of the Commissioner of Income Tax (Appeals), is liable to be set aside. - Decided in favour of revenue.
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2018 (11) TMI 328
Non issue of Form No.16 to salaried employees employed by Companies and Corporations - petitioner says that the Form No.16 having not been issued in time, the employees are suffering serious consequences and are proceeded against for breaching and violating legal provisions - Held that:- We want the Ministry of Finance, Department of Revenue also to be made aware of these serious lapses in Mumbai and around. We have noticed that there is no transparency, in the sense, no information is ever displayed in relation to such defaulters by the Department. We expect the Department to provide information of such defaulters so that those seeking employment or awaiting either retiral benefits or such other sums from the employers would know in advance as to how they are expected to comply with law. The petitioner says that he is a senior citizen of 65 years of age and because he is not in possession of Form No.16, he has suffered at the hands of the Department. Let, therefore, the necessary steps be taken in law so that such occurrences are avoided in future. We would expect the Department of Revenue, particularly, Department of Income Tax to penalise such defaulters and take other strict measures contemplated by law against them. We post this matter in the hope that this Writ Petition will be taken as test case by respondent No.1.
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2018 (11) TMI 327
Rectification of mistake - disallowance of deduction under section 54F in respect of the alleged expenditure on construction of house, registration charges and payment to deed writer - Held that:- So far as the registration charges are concerned, this is a matter of record and, therefore, there cannot be any dispute about the said expenditure. However, the other two claims of expenditure need a proper verification and examination. Accordingly we modify the impugned order and direct the AO to verify these claims of expenditures incurred in respect of construction of house, registration charges and payment to deed writer for the purpose of allowing the deduction under section 54F in respect of the residential house no. 79, Vivek Vihar, Jagatpura, Jaipur. Accordingly, the AO has to adjudicate the issue after allowing an opportunity of hearing to the assessee. Resultantly, ground of the assessee’s appeal stands allowed for statistical purposes.
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2018 (11) TMI 326
Addition of cessation of liabilities u/s 41(1) - admission of additional evidence - Held that:- Additional grounds need to be admitted and sent back to the file of the AO for verification. It is true that by agreeing to the addition during the course of assessment proceedings, the assessee has prevented the AO from further inquiries on the issue. However, since the assessee has challenged the admission in the written submissions filed before the CIT (A), the CIT (A) ought to have considered the admissibility or otherwise of such grounds and if the grounds are admitted, then the allowability of such grounds. On the basis of material on record, we deem it fit and proper to remand the same to the file of the AO for reconsideration in accordance with law.
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2018 (11) TMI 325
Reopening of assessment u/s 147 - Addition under the head undisclosed income - short term capital gain addition - Assessing Officer has mentioned that the assessee is not assessed to tax - Held that:- AO's conclusion are factually incorrect as Exhibit 1 shows that the assessee has filed return of income on 29.09.2010 electronically. Exhibit 12 is a letter issued by the ITO, Ward 1(2), Noida asking the assessee to furnish details in respect of purchase of immovable property stating that the assessee has purchased the said property without quoting PAN. Exhibit 13 is the reply filed by the assessee explaining the financial transactions. Exhibit 16 is another notice by the ITO, Ward – 1(2) asking the assessee to furnish information in respect of financial transactions. Surprisingly, this notice contains PAN of the assessee. In the earlier notice, as mentioned elsewhere, the same ITO observed that the assessee has entered into transaction without quoting PAN. Exhibit 17 is the reply filed by the assessee. Exhibit 18 is again a notice by the same ITO asking the assessee to once again furnish information regarding financial transactions. Exhibit 19 is the reply filed by the assessee. All these facts when considered with reasons recorded for reopening of the assessment would lead to only one conclusion that the reasons recorded for reopening the assessment are devoid of any application of mind. In our considered opinion, such reopening cannot be upheld. - Decided in favour of assessee
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2018 (11) TMI 324
Addition u/s 68 - cash deposits and other unexplained deposits made in various bank accounts of the assessee - Assessee submitted that he had filed plethora of evidences in support of the explanation given for each and every deposit - Held that:- None of the evidences have been properly dealt with or has been rebutted either in the remand report by the AO or by the ld. CIT(A). All the evidences goes to the very root of the explanation tendered by the assessee which have not been rebutted or adverted, therefore, we are of the opinion that the entire issue should be remanded back to the file of the Assessing Officer who shall consider all these evidences and explanation of the assessee and decide the issue a fresh and in accordance with law after giving due and effective opportunity to the assessee to substantiate its case. - Decided in favour of assessee for statistical purposes.
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2018 (11) TMI 323
Nature of receipt - ‘compensation for permanent loss of business or income generating asset’- revenue OR Capital receipt - as per AO payment received by the assessee company is in consideration of the efforts made by the assessee for facilitating the availability of land and for the services rendered by it although in the MOU - Held that:- After numerous rounds of deliberations & meetings between LIPL and the assessee company, MOU was executed on 31st January, 2009 leading to determination of compensation in lieu of cancellation/termination of the earlier MOU Dated 19th November, 2001 or in lieu of determination of its rights in the said MOU ultimately leading to loss of source of income. It is the construction of this MOU executed on 31st January, 2009 which ultimately decides the nature of receipt of the impugned amount termed as “Compensation”. We find the assessee correctly claimed such compensation as capital receipt being loss of source of income We find the assessee during the course of appeal proceedings had filed a certificate issued by LIPL where in they have certified that the compensation had been determined and paid by them for stalling the execution of the agreed work as above in terms of the earlier MOU. The above clarification issued by LIPL clearly shows that the compensation received by the assessee is for sterilization of the profit making apparatus of the assessee company. The various decisions relied on by Ld. Counsel for the assessee also support its case that the impugned receipt is capital in nature. - decided against revenue
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2018 (11) TMI 322
Reduction of assessee’s claim of deduction u/s 54 - housing loan of ₹ 50 lakh invested in purchase of new house excluded from the deduction claimed u/s 54 - reason for part disallowance as alleged utilisation of housing loan availed from Citi Bank towards purchase of new house - Held that:- From the material placed before me, it appears, the assessee along with others had purchased a new flat vide agreement dated 23rd September 2010. From the copy of the said agreement placed in the paper book it also appears that the total sale consideration of ₹ 2.50 crore was also paid to the vendors before or at the time of execution of the agreement. Thus, from the aforesaid facts available on record, prima–facie, it appears that the housing loan taken by the assessee was not utilised for purchase of the new house. On a plain interpretation of section 54(1) of the Act, it has to be concluded that if the assessee purchases a new house property one year before or two years after the date of transfer of original asset, it is entitled to claim deduction under section 54 of the Act irrespective of the fact whether money invested in purchase of new house property is out of the sale consideration received from transfer of original asset or not. The conditions of sub–section (2) of section 54 of the Act comes into play only in a situation where the assessee does not stick to the time limit provided under section 54(1) of the Act. Undisputedly, in the present case, the assessee has purchased the new house property within the stipulated period of two years from the date of transfer of original asset. That being the case, the assessee is eligible to avail deduction under section 54 of the Act. Accordingly, the Assessing Officer is directed to allow assessee’s claim of deduction under section 54(1) of the Act. - Decided in favour of assessee.
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2018 (11) TMI 321
Revision u/s 263 - assessment under project completion method - AO’s order is erroneous as the same was accepted without proper enquiries/ verification and causing prejudice to the interest of the revenue - Held that:- There is no change in method for computing profit rather the assessee is consistently following percentage completion method and even in future years, the Revenue has accepted the same method without any tinkering. In the present case before us, the entire details were filed before AO and AO after going through the details has passed the assessment order under section 143(3) of the Act. The completed Projection completion method was explained before the AO by assessee vide letter dated 05.01.2015 filed during the course of assessment proceedings under section 143(3) of the Act. The AO has gone into the details and made enquiry about the completed project completion method and made assessment thereafter. There is no other possible view taken by the AO because this view has been confirmed by Hon’ble Bombay High Court and also Tribunal consistent taken a view that the assessee’s consistent method for determining income is completed project completion method and there is no change in the same. Once, this is the position there is no question of revision. Hence, in the given facts and circumstances, we quash the revision order passed by PCIT and allow the appeal of the assessee.
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2018 (11) TMI 319
Loss arising on revaluation of foreign exchange outstanding - allowable deduction - the said loss has not been routed through the books of account - year of assessment - Held that:- Assessee cannot be debarred from claiming a sum as deduction only for the reason that the assessee has failed to debit liabilities in its books of account. Unrealized loss due to foreign exchange fluctuation relating to trading assets and liabilities as on the last date of accounting year is allowable as deduction. See KEDARNATH JUTE MANUFACTURING COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX (CENTRAL), CALCUTTA [1971 (8) TMI 10 - SUPREME COURT] and CIT VERSUS M/S WOODWARD GOVERNOR INDIA P. LTD. & M/S HONDA SIEL POWER PRODUCTS LTD. [2009 (4) TMI 4 - SUPREME COURT] CIT(A) has relied upon the books of accounts of the succeeding year i.e. pertaining to A.Y. 2010-11, wherein the assessee has claimed to have accounted for this loss and after setting off this loss it has disclosed net profit of ₹ 301.55 lakhs as foreign exchange fluctuation gains. We noticed that these materials were not confronted to the Assessing Officer. Since the loss of ₹ 489.66 lakhs is held to be allowable in AY 2009-10, the same is liable to be disallowed in AY 2010- 11. Otherwise, it will lead to double deduction of same amount, which is not permitted under the Act. We notice that the Ld CIT(A) has not examined this aspect. Hence, for the limited purpose of examining these aspects, we restore this issue to the file of the Assessing Officer. The impugned claim of the assessee is to be allowed in the year under consideration. Since the details of entries passed in the year relevant to the AY 2010-11 need to be verified by the AO, we have restored this issue to the file of the AO for the limited purpose as stated in the earlier paragraph. - Decided against revenue
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2018 (11) TMI 318
TDS u/s 194C - payments made for reimbursement of expenses to clearing house agents - addition u/ 40(a)(ia) - Held that:- It is noticed that the assessee has not deducted tax at source as the bills raised by the clearing and forwarding agent were in respect of reimbursement of actual expenses incurred by them on behalf of the assessee. We observe that these facts demonstrate that there was no element of income involved in such reimbursement transaction. The Hon’ble High Court in the case of Principal CIT-1 vs. Consumer Marketing Pvt. Ltd. Tax [2015 (11) TMI 124 - GUJARAT HIGH COURT] has held that since the reimbursement bills were separately raised there was no requirement to deduct TDS and disallowance u/s. 40(a)(ia) of the act could not be made in respect of reimbursement bill which were separately raised as no TDS was required to be in respect thereof. - Decided against revenue Order passed u/s.201(1) & interest charged u/s. 201(1A) - default in deduction of tds - mismatch of CIN number registered in the OLTAS statement and the CIN number mentioned by the assessee - Held that:- The assessee claimed that actually TDS was paid and there was no case of non-payment of TDS because on processing of TDS statement it was wrongly shown as nonpayment of TDS. This mistake has been occurred due to mismatch of CIN number registered in the OLTAS statement and the CIN number mentioned by the assessee. The revised TDS statement after rectifying the mistake in CIN number could not be submitted because of technical reason as the online system was not allowing the processing of TDS statement for financial year 2006-07. Therefore, the assessee has simultaneously applied to the assessing officer for rectification of the order passed. It is also stated that the annexure to the order of the assessing officer provides list of challans reported in the return but not found in the OLTAS. CIT(A) has directed the assessing officer to verify from the bank as to whether the claim of the assessee having deposited the amount through challan are correct or not. - decided against revenue
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2018 (11) TMI 317
Addition on account of value of DEPB license - assessee entitled to DEPB license against the export of goods - estimation of the realizable value of the DEPBs as against their actual value - Held that:- We find that in respect of the sales that were made in the Financial years 2012-13, 2013-14, 2014-15, when the DEPB was sold to Vicky Bhalla, Jain International and Mehta Export Corporation, the assessee realized only 83.14% to 88.08% of the actual value of DEPBs necessitating them to written off the loss. So also in the year 2014, there was lapse of DEPBs. There is no dispute from the revenue as to the actual value realized by the assessee in respect of the DEPB on their sale which is something around 90% or less of their actual value. The statistics furnished by the assessee suggests that there is a basis for the assessee to estimate the realizable value of the DEPBs as against their actual value and inasmuch the DEPBs that fetched the highest price from Bajaj Overseas Impex was at 90%, we are convinced to believe that there is a scientific basis for the assessee to estimate the probable realizable value of the DEPB at 90%. Further in view of the Notification No. SO 69(E) dated 25.1.1996, it is permissible for the assessee to make provision for all known liabilities and losses even though the amount cannot be a certainty and represents only a best estimate in the light of available information and if the fundamental accounting assumptions relating to going concern consistency and accrual are followed in the financial statements, specific disclosure in respect of such assumptions is not required and in this context consistency is referred to the assumption that accounting policy are consistent from one period to another. Nothing irregular in the assessee declaring the realizable value of the DEPBs on their sale at 90% and to write off the losses arising on the sale or lapse of DEPBs in the subsequent years. With this view of the matter, we are inclined to accept the submissions made by the assessee and to direct the learned AO to delete the addition made on this score. - Decided in favour of assessee Ad hoc disallowance of the telephone expenses, travelling and conveyance expenses and export promotion expenses - AO recorded that there is an element of personal use by the directors and employees of the assessee company - CIT-A allowed part relief - Held that:- CIT(A) had given some relief to the assessee on this still there is no reason or logic behind the sustaining of the disallowance as enumerated above. It is purely an ad hoc addition on estimate basis without reference to the books of accounts of the assessee or finding out any particular discrepancy therein. The assessee produced the details of the telephone expenses, export promotion expenses by way of page Nos.6 to 9 of the paper book and none of these expenses would go to show the involvement of the personal expenses in this. In these circumstances, we are of the considered opinion, without pointing out to any particular discrepancy in the books of accounts of the assessee or without rejecting the books of accounts, such disallowance on estimate basis has no logic behind it and we find it difficult to sustain the same. - Decided in favour of assessee.
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2018 (11) TMI 316
Disallowing deduction claimed u/s 80IA - disallowance for want of tax audit report in Form 10CCB along with the return of income - AO noted as form no. 10CCB to be e-filed along with the return of income and audit report has not been done - whether claim of such deduction should not be disallowed for ‘bona-fide’ and ‘procedural lapse’? - Held that:- This is not the first year of claim of deduction under section 80IB and, therefore, it is not the case of the A.O. that the assessee’s undertaking is not eligible for deduction under section 80IB. However, only for want of filing of form no. 10CCB along with the return of income and through e-filing, the AO has denied the claim of deduction under section 80IA. The assessee subsequently filed the form no. 10CCB during the assessment proceedings and also explained the reasons for not e-filing the form 10CCB along with the return of income. There is no dispute that the return of income was filed within the period of limitation provided under section 139(1) of the IT Act. Hence only because the assessee could not e-file the form no. 10CCB along with the return of income, the assessee cannot be denied the benefit of section 80IA. Also as the assessee had duly explained the reasons for not filing form no. 10CCB along with the return of income by way of filing the affidavit of the auditor of the assessee. Hence we allow the claim of the assessee and orders of the authorities below are set aside. - Decided in favour of assessee. Adhoc disallowance of certain expenses - Held that:- In view of our finding on ground no. 1 regarding the claim of deduction under section 80IA, the expenses to the extent of the eligible business of the assessee shall have no revenue effect even if adhoc disallowance is made by the AO. Accordingly, the AO is directed to reconsider this issue in the light of the adjudication of ground no. 1.
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2018 (11) TMI 315
Disallowance of Deferred revenue expenditure - AO held that the said claim is in the nature of capital - Held that:- We find that the revenue has accepted and allowed 1/5th of the some expenditure in the earlier years as claimed by the assessee. The CIT-A found satisfied on perusal of record that no material changes caused effect in respect of facts involved the issue in hand. DR did not bring on record any decision contrary to the finding of the CIT-A. No infirmity in the impugned order of the CIT-A. We uphold the same. Ground no. 1 raised by the revenue is dismissed. Long term capital loss - disputed loss has arisen on account of transfer of shares and debentures in terms of said settlement approved by Hon’ble High Court - CIT-A examined the record and found that cost of share was made in terms of approval of the Hon’ble High Court of Calcutta - Held that:- We are of the view that the CIT-A was correct in directing the AO to carry forward the said loss as the genuineness of the loss had been upheld. We find no infirmity in the impugned order of the CIT-A. Ground no. 2 raised by the revenue is dismissed. Addition on account of loans - According to assessee an amount was outstanding - Held that:- In terms of settlement the assessee received only ₹ 1 crore as full and final settlement. The assessee contended that it suffered loss and as such made a claim of bad debt written off for the interest portion. The CIT-A considering the submissions of assessee granted the benefit of bad debt written off. We find that the amount recovered by the assessee is less than the principal amount as given by assessee under loan. The assessee recovered an amount of ₹ 1 crore out of total dues of ₹ 3,04,45,954/- only the interest portion of ₹ 81,95,954/- which is part of ₹ 3,04,45,954/- was claimed as bad debt. The same was allowed by the ld. CIT(A). We find no infirmity in the impugned order of the CIT-A. TDS u/s 195 - commission paid to selling agents, who are based abroad and has no permanent establishment in India - PE in India - Held that:- Since the commission has been paid to nonresident agents for services rendered outside India and the same is not chargeable to tax in India under the Act. Therefore, in our opinion, the CITA has rightly observed that the tax is not required to be deducted on payments made to them as per section 195 of the Act and with Circular No:786 dt:07.02.2000 issued by the CBDT. All the parties are nonresidents and for deducting tax at source is not required
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2018 (11) TMI 285
Disallowance u/s.14A r.w. Rule 8D(2) - non recording of satisfaction - Held that:- AO failed to record the sustainable satisfaction before invoking the provisions of section 14A of the Act. Therefore, the disallowance made by the AO is unsustainable technically. Accordingly, this part of the argument of Ground No.1 is allowed. Disallowance of foreign travel expenses of employees - allowable busniss expenses - Held that:- On 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. Assessee is directed to produce relevant documents to substantiate his claim. Classification of items of fixed assets - rate of depreciation - AO made addition being difference in depreciation @10% and 15% on some items under block of Plant and Machinery treating the same as Furniture - Held that:- We find this issue is settled one in favour of the assessee by virtue of the orders of Tribunal in the A.Yrs. 2006-07 to 2009-10. Considering the same and following the rule of consistency, we allow the ground No.3 raised by the assessee. Disallowance on account of Product Development expenses - Held that:- The assessment year specific approach is the decided issue legally and not the date specific approach. We find the facts are somewhat identical to the facts of the present case. Considering the above, we allow the Ground No.5 (a) and (b) needs to be remanded to the file of AO for fresh adjudication on the matters. Addition u/s.48 on account of demat charges which was claimed as expenditure incurred for earning income from capital gains to be deleted Addition made on account of rent paid for the property at Bungalow No.70, Koregaon Park and depreciation - Held that:- As decided in assessee's own case there is no clarity with reference to the capitalised items of assets credited to the Serum Institute of India Ltd. in the said house premises occupied by Mr. Z.S. Poonawalla, applicable rate of depreciation and the use of the asset etc. As discussed in the open court, we are of the opinion that this limb of the ground should be remanded to the file of AO for fresh adjudication after granting reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Allowability of depreciation @80% on the cost and Electrical and Civil Works - Held that:- Considering the binding precedents on this limited issue of allowing higher depreciation on the civil works linked to the foundation work of the windmill, we are of the opinion that the assessee is entitled to claim higher depreciation @80% on the civil structures of the windmill which is part and parcel of the windmill and which cannot be separated. Therefore, the order of CIT(A) holding that the higher depreciation is applicable in windmill and also expenses incurred on civil structure, is fair and reasonable and it does not call for any interference. Accordingly, the ground raised by the Revenue is dismissed. Disallowance of Selling and Distribution Expenses - allowable business expense - discounts on purchase of vaccines given to doctors - Held that:- The 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 above, we are of the opinion that the Ground No.10/Modified Ground No.10 raised by the assessee should be allowed in favour of the assessee. MAT - Allowability of deduction to the Wealth Tax paid by the assessee for the purpose of computing book profits u/s.115JB - AO denied the said payment of tax as not an allowable deduction - Held that:- The wealth tax paid by the assessee, being an ascertained liability is an allowable deduction for the purpose of section 115JA of the Act. Accordingly, Ground by the assessee is allowed.
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Customs
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2018 (11) TMI 314
Maintainability of appeal to Tribunal - Grant of CHA License - Regulations of 2004 were in force - Held that:- It is evident that appeals to the Tribunal are maintainable at the behest of persons who are aggrieved by any order of a Principal Commissioner or by Commissioner of Customs in her capacity as an Adjudicating Authority . It is important to underline this aspect because but for Regulation 21 even applicants who were declined a licence would not be able to avail of the remedy of appeal to CESTAT. Unless the controlling parent enactment is expressed or by force of necessary implication, it can be inevitably interfered with the subject matter of a particular dispute, is appealable, appeals cannot be claimed as a matter of right - the order of the Commissioner was styled as an order-in-original or even that it mistakenly pointed to an appellate remedy under Section 129-A of the Customs Act, was not in any manner conclusive or whether such appeal was maintainable. This Court is therefore of the opinion that the CESTAT s decision is sound and does not call for an interference. Appeal dismissed - decided against appellant.
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2018 (11) TMI 313
Rectification of mistake - valuation of imported goods namely, Phenol - price of contemporaneous import made by C.G. Shah Co - Held that:- It is observed that the quantity of goods in case of applicant and in case of Overseas Polymer which was adopted by the department are different. The quantity imported by the applicant is much higher than that of overseas polymers. This fact is also very vital for the conclusion of the valuation by the department - the vital facts of contemporaneous imports as discussed above has not been properly considered by the lower authority in the impugned order which was upheld by this Tribunal in TOTO, therefore, there is an apparent error in the order of this Tribunal. Time Limitation - delay in filing ROM - Held that:- Undisputedly the appellant after passing the final order by the Tribunal approached to Hon ble Supreme Court as statutory remedy by filing a Civil Appeal. However, on realizing that there is an error in the order, they decide to file ROM before this Tribunal, accordingly, the civil appeal was withdrawn - In these circumstances, the period of pendency of civil appeal before the Hon ble Supreme Court will stand excluded from the limitation provided for filing ROM, if any, therefore, it cannot be said that there is a delay in filing the ROM. Since the adjudicating authority has not given proper finding on the other contemporaneous import of C.G. Shah Co as well as no finding was given on Rule 5 of Customs Valuation Rules, the matter needs to be re-considered - matter remanded to the assessing authority for re-consideration of the valuation - appeal allowed by way of remand.
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2018 (11) TMI 312
Refund of Customs duty paid - rejected on the ground that the appellant has not challenged the order-in-original dated 30.09.2014 - Held that:- Once there was lis between department and the assessee and by passing a speaking order, the Deputy Commissioner held that value for the purpose of customs duty shall be the value adopted originally. The impugned order came to be passed thereafter - Unless and until the order on IGM amendment is challenged/reversed, the appellant without taking such recourse, suo-motu cannot decide the value differently. In the facts and circumstances of the present case, it was legal obligation on the appellant to challenge the order of IGM amendment, if at all they were not satisfied on the issue of valuation - without challenging that order, straightway claiming the refund is clearly pre-mature - appeal dismissed - decided against appellant.
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2018 (11) TMI 311
Export of Non-Basmati Rice or not - restricted item - whether the appellant exporters have exported Basmati Rice as permissible or have exported non-Basmati Rice which was a restricted item for export? Held that:- It is evident from the documents on record that no test report is available which can reliably certify that the rice under export was Basmati or non-Basmati - the impugned order is presumptive and vague, there being no cogent evidence available on record, supporting the findings of the respondent-Commissioner. The respondent-authorities are directed to grant the consequential benefits, including return of pre-deposit etc., made during the pendency of these proceedings forthwith, not exceeding a period of 60 days from the date of receipt of a copy of this order - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2018 (11) TMI 338
Corporate insolvency proceedings - claim of operational debt - Held that:- Section 3(6) (a) would not be applicable since the applicant has not proved that he has a right to payment. We have noted above that the pending material of ₹6,94,22,164/- is stated by the applicant to be withheld and still lying idle at its works. There is no averment that under the terms of the agreement the ownership of the material of ₹6,94,22,164/- passed to the corporate debtor. Section 3(6) (b) would not be applicable since there is no averment that the breach of contract, if any gives rise to a right to a payment. Therefore, the applicant’s contention of claim of operational debt of ₹6,94,22,164/- cannot be accepted. The remaining part of the claim relates to material inventory cost (₹21,10,36,800/-); escalation cost (₹6,33,60,000); overstay cost (₹90,00,000); watch and ward (₹14,00,000) totalling to ₹28,47,96,800/-. These amounts appear to be in the nature of damages and would not be covered by the definition of claim. In result thereof, the application is rejected. Approval of resolution plan - whether the resolution plan has provisions for its effective implementation? - Held that:- We have examined the compliance of the conditions provided for in Section 31 (1) of the Code above and in view of the discussion made in the preceding paragraphs and the provisions of Sections 31 (1) of the Code, we approve the resolution plan submitted by M/s Dolphin Energy Enterprises subject to discussion as above in the case of the corporate debtor and the same is directed to be binding on the corporate and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.
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FEMA
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2018 (11) TMI 310
Application for condonation of delay in filing the appeals - Conversion of petition to an appeal - Held that:- When the petitions came up for consideration, our attention was invited to the decision of the Apex Court in Raj Kumar Shivhare Vs. Asstt. Director, Directorate of Enforcement, (2010 (4) TMI 432 - SUPREME COURT). Therefore, the appropriate remedy to challenge the impugned orders would be an appeal under Section 35 of the FEMA. It is an undisputed position that both these petitions have been filed within a period of 120 days from the date of the impugned order of the Appellate Tribunal as provided under Section 35 of the FEMA. Mr. Jain, prays that he be allowed to convert this petition into an appeal. Mr. Vyas for the respondent has no objection at this being allowed. Thu the petitioners are allowed to convert both the petitions into appeals under Section 35 of the FEMA. The petitioners would take the necessary steps including payment of appropriate Court Fees etc. with the Registry to convert both the petitions into appeals on or before 30th November, 2018
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PMLA
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2018 (11) TMI 309
Offence under PMLA - Provisional Attachment Order - Held that:- As regard to plea as to whether right of the appellant would prevail over the rights of the other secured creditors, no opinion is being expressed. The said aspect would be considered by the Court where the prayer of execution of sale deed is pending or before the Special Court who is also empowered to pass such order under the proviso of amended provision of section 8(8) of the Act (Act of 2018). All secured creditors including DRT and banks are at liberty to raise the objection as per law as admittedly this tribunal is not deciding the fate of title of the flat in question. From the entire gamut of the matter, it is evident that the appellant was the claimant in the flats. By making the entire payment, the appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The question of link and nexus in the criminal activities directly or indirectly does not arise. As far as the impugned order dated 1.12.2016 is concerned, the same is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flats in question. The provisional order is also quashed accordingly by allowing the appeal. As clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flats allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition proceedings. It is alleged that the flats in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the respondent nos. 3, 5 and 8, unless the final order is passed in his favour, shall not create third party interest directly or indirectly.
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Service Tax
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2018 (11) TMI 308
Works contract service - Erection, Commissioning or Installation service - bidding for projects relating to various works in different States - Held that:- The Civil Appeals are dismissed both on the ground of delay and merits.
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2018 (11) TMI 307
Date of effectiveness of service - services of erection of transmission tower at site - Whether the services of erection of transmission tower at site is covered by taxable services under the head Erection, Commissioning and Installation with effect from 10.09.2001 or with effect from 01.05.2006 which is date of amendment of statutory definition of the said services? - Held that:- As per the amended definition with effect from 01/05/2006, Erection, Commissioning or Installation of structures, whether pre-fabricated or otherwise was added with effect from 01/05/2006 only. Accordingly, the Service Tax prior to 01/05/2006 was not leviable on the services provided by them - this particular service i.e., Erection, Commissioning or Installation of structures was specifically incorporated in the definition of Erection, Commissioning or Installation service with effect from 01/05/2006. Therefore, it is clear that this service was not covered under the definition of Erection, Commissioning or Installation prior to 01/05/2006. Refund claim - duty paid under protest or not? - time limitation - unjust enrichment - Held that:- Once a letter dated 14/10/2005 was filed towards the payment of Service Tax under protest, in our considerate view, the protest was in continuation and whatever Service Tax was paid, that will be treated as under protest. Accordingly, time bar will not apply in this case - Only by proving that the incidence was not passed on to the service provider is not sufficient but it is also required that the incidence of such service tax was not passed on to any other persons also which can be established from the books of accounts. Therefore, the appellant is required to establish that incidence of service tax paid by them was not passed on to any other persons by providing the sufficient evidence - matter requires reexamination. Whether the appellant’s service is covered under Work Contract service. If so, whether it is taxable prior to 01.06.2007? - Held that:- To conclusively decide whether the service is of works contract or other service, some vital facts need to be verified such as that whether the service was provided along with material, whether the appellant have discharged the VAT/WCT to the concerned State Government. On ascertaining the above facts it can be decided whether the service is of works contract or otherwise. If it is found that the service is of works contract, it is not taxable prior to 01/06/2007 - Matter on remand. Matter remanded to the Adjudicating Authority for passing a fresh order - appeal allowed by way of remand.
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2018 (11) TMI 306
‘Rent a cab’ service or not? - providing air-conditioned cars on hire basis to various government departments - Extended period of limitation - Held that:- N/N. 25/2012 dated 20.06.2012 was amended through N/N. 6/2014 dated 11.07.2014 wherein the said entry at Clause 23(b) has been amended and the said exemption was restricted only to non-air-conditioned vehicles - thus, from 11.07.2014, the air-conditioned vehicle which is provided by the appellant is attracting Service Tax as applicable - demand upheld. Extended period of limitation - penalty u/s 78 - Held that:- In view of litigation going on on the issue there is no element of suppression involved - extended period cannot be invoked - penalty also set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 305
Penalties u/s 77 and 78 of FA, 1994 read with Rule 15(2) of CCR 2004 - payment of service tax before issuance of SCN - Held that:- Revenue has agreed that the entire amount confirmed was paid before issue of show cause notice and has been appropriated through the Order-in-Original - sub-section 3 of section 73 of the Finance Act, 1994 has provided if service tax is paid before issue of show cause notice, the proceedings get concluded. There was no need for issue of show cause notice in respect of the demands confirmed in the Order-in-Original - penalty set aside - appeal allowed.
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2018 (11) TMI 304
Janta Personal Accident Insurance Plan - benefit of N/N. 3/94-ST dated 30.06.94 - insurance policy provided by the appellant to the Govt. of U.P. for providing insurance cover to 2,50,00,000 farmers for an assured sum of ₹ 1 lakh each on premium of ₹ 10.50 per person - Whether standard insurance policy i.e. Janta Personal Accident Policy covered under Notification No.3/94-5 dated 30.06.1994 or not? Held that:- Just because the agreement of the appellant with the Govt. of U.P. mentions two grounds for rejection of claim policy not covering self-exposure to needless peril except in an attempt to save human life and the cases where claims not submitted within 90 days from the date of accident, the policy in question would cease to be the Janta Personal Accident Policy - the Board vide its letter dated 18.01.2011 has specifically clarified that since description of JPAP Policy is not given in the notification, customized group JPAP Insurance schemes by various insurance companies as per specifications of the State Govt. concerned, to extend risk cover to target populations and to fulfil the prescribed ‘rural or social sector’ obligation, are covered by the Notification No.3/94-ST. There is no requirement in the notification that the Janta Personal Accident Policy referred to in the notification must be submitted to the IRDF for its approval. Demand no sustainable - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (11) TMI 303
Validity of remanding the appeal - the appeal was pending for 11 years before the Tribunal - Held that:- This grievance has no merit as the delay was only on account of the appellant's appeal awaiting its turn before the Tribunal - However, unless the parties invite the attention of the Tribunal that the issue is covered, no occasion would arise for the Tribunal to have any knowledge of the same. In this case, no application was filed by the Appellant for early hearing by pointing out that the issue is covered by its earlier order. This delay was only in view of the appeals awaiting its normal turn for consideration - the grievance of delay in disposing of the appeals by the Tribunal has no merits and is not accepted. Appeal dismissed.
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2018 (11) TMI 302
MODVAT/CENVAT Credit - inputs/capital goods - machines/ equipments of a sugar plant - Scope of SCN - reliability on precedent decisions - Held that:- On plain reading of the Rule 2(b) and 3 of the Credit Rules, 2002, it is clear that the capital goods in the present facts had been received in the Respondent's factory and used in the factory. Thus, the duty paid on this capital goods is available to the Respondent, to be taken as CENVAT Credit as it is duly supported by appropriate cenventable invoices. It is not the case of the Revenue that the machines/ equipments are not relating to manufacture of final products. The only case of the Revenue is that these machines/ equipments loose their identity as they became a part of the set up plant and have to work along with other machines / equipments to manufacture final products. The submission of the subject equipment/ machines loosing its identity in the sugar plant is contrary to the show cause notice as it proceeds on the basis that it is capital goods, as it restricts the allowance only to 50% of the credit for each year of use. Rule 3 of the CENVAT Credit Rules, 2002 requires the receipt of the capital goods in the factory for use in or in relation to manufacture of final products. The subject equipments / machines are undoubtedly used in or in relation to the manufacture of final products. Thus, the literal rule of interpretation when applied to the CENVAT Credit Rules, 2002 would entitle the Respondent to the benefit of CENVAT Credit on the duty paid equipment / machines (capital goods). On an identical issue arose before the Tribunal in JSW Ispat [], the machines/ equipments were used to set up/ assemble an oxygen plant i.e. immovable property in the factory of the assessee. This oxygen plant was issued to manufacture the excisable goods i.e. manufacture ingots falling under Chapter 72 of the Excise and Tariff Act, 1985. Nevertheless, the Tribunal allowed of CENVAT Credit of duty paid on machines / equipments used in setting up a plant, to be utilised on payments of duty on the final products viz: iron and steel ingots cleared by the assessee, therein - no distinction in facts and law, is pointed out by the Revenue, which would justify the inapplicability of this case to the present facts. We are unable to understand why the Revenue is agitating this issue before us when in another case, decided by the Tribunal, raising an identical issue, the decision of the Tribunal has been accepted - Rule of law prevailing in this country is one of the key elements to determine ease of doing business. The Rule of law inter alia ensures absence of arbitraries in taking decisions, which would mean equal applicability of law to all concerned. Therefore, an issue as raised herein (being a pure question of law), would have all India implication not only before the Court but at various levels of adjudication under the Act. Therefore, where at the highest level i.e. at the level of the Central Board of Indirect Taxes and Customs, the Revenue has accepted a particular view on a pure question of law, then in all such cases, the Revenue should withdraw the show cause notices and / or pending proceedings. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 301
Pre-deposit - return of the amount deposited in this Court - Held that:- The Commissioner of CGST and Central Excise, Nashik, on considering all the contentions raised by the parties, arrived at a conclusion that the proceedings initiated against the appellant is not sustainable - appeal disposed off.
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2018 (11) TMI 300
Intermediate goods - Clinker manufactured and used in the manufacture of Cement - benefit of N/N. 67/95-CE dated 16.03.1995 - International Competitive Bidding - The case of the department is that since the final product i.e. Cement is cleared under Exemption N/N. 6/2006-CE dated 01.03.2006, the Clinker manufactured and used for manufacturing of Cement is not eligible for Exemption N/N. 67/95-CE dated 16.03.1995. Held that:- The appellant have manufactured Clinker which is an intermediate product and the same was consumed in the manufacturing of other final product i.e. Cement. The said final product i.e. Cement has been cleared against “International Competitive Bidding” in terms of Exemption N/N. 6/2006-CE dated 01.03.2006, according to which the rate of duty is nil. From the plain reading of the above notification, it is observed that as per the above Notification, exemption is available in respect of goods used captively in the factory, within the factory of production in relation to manufacturing of final product. The Proviso to above notification provides that nothing contain in this Notification shall apply to inputs used in or relation to the manufacture of final product which are exempted from the whole duty of excise or chargeable to nil rate of duty, however the exception to this Proviso is provided in respect of supplies meant as mentioned in Clause I to V and also under Clause (VI) when the obligation prescribed in Rule 6 of Cenvat Credit Rule, 2001 is discharged. The Exemption is available in respect of inputs used captively even though the final product is cleared under exemption as per Rule 6(6)(vii) of Cenvat Credit Rules, 2004 since the appellant’s supply of final product is under N/N. 6/2006-CE. The issue is decided in the case of M/S. KEI INDUSTRIES LTD., N HASHMI VERSUS COMMISSIONER OF CENTRAL EXCISE [2016 (12) TMI 532 - CESTAT NEW DELHI], where it was held that As facts of the case are not disputed that the appellant is manufacturing final products and clearing the same on payment of duty in the open market and to Mega Power Projects without payment of duty. In that circumstances, the appellant is entitled for benefit of N/N. 67/1995 ibid for intermediate product emerging during the course of manufacture of final product. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 299
Recovery of sanctioned refund claim - refund were sanctioned under Rule 18 read with Notification No. 21/2004-CE (NT) - demand on the ground that rebate of duty paid on materials/inputs used in the manufacture of resultant export products under advance licence is not allowable /admissible as per Condition No. (viii) of the Customs N/N. 96/2009-Cus - case of appellant is that the subject Condition No.(viii) of the said Customs N/N. 96/2009-Cus is not applicable to the appellant s case, as the appellant had not availed export rebate in respect of materials which they had imported duty free under the N/N. 96/2009-Cus. Held that:- There is no conditions in the said Notification that if any Contravention of the condition of Notification No. 96/2009-Cus is made then the assessee is not be eligible for rebate of duty paid on raw material used in the export goods in terms of Rule 18 and Notification issued there under - Rule 18 Notification No. 29/2004-CE is self contained statutory provision for granting rebate of duty paid on raw material used in the export goods subject to certain procedure /permission. The appellant have scrupulously followed the procedure and also obtained the permission, only after compliance thereof the rebate was sanctioned, since, in view of this position, it is not permissible in law to import any extraneous conditions of some different Notification into the provision of rebate and rebate cannot be rejected for that reason. Also, the appellant have claimed the rebate only in respect of indigenously procured raw material on which no benefit of N/N. 96/2009-Cus was availed, therefore, on this fact even the allegation in the show cause notice even though it is not sustainable as irrelevant with the sanction of rebate claim under Rule 18. The appellant was legally entitled for rebate claim even if there is any violation of conditions of Notification No. 96/2009-Cus if any - the order for recovery of the said rebate claim is absolutely illegal and not tenable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 298
CENVAT Credit - duty paying documents not provided - what was the actual position of availability of Cenvat credit as on 30.12.2008, that is to say as to whether ₹ 72,75,421/- which was available as on 31.12.2008 in their RG 23A Part-II as alleged in the show cause notice dated 20.1.2010 or ₹ 2,77,49,625/- as per ER-I return for the relevant period filed on 17.2.2009 which was filed with the department? Held that:- The requirement of duty paying documents for availment of Cenvat credit is substantive law - the appellant having not followed the procedure as prescribed for availment of Cenvat Credit Rules are not entitled for the Cenvat credit to the extent of ₹ 2,04,74,204/-. To that effect, it is found that Adjudicating authority has not violated the provisions of Cenvat credit in any way while denying the credit. In the present case, it is not disputed that the appellant has not provided any documents for huge amount of credit taken in their books of account and also utilised for the purpose of payment of duty. It was therefore, correct on part of the departmental officer to get them reversed and accordingly the same has been done by the appellant. Although, the appellant has contested that the reversal was done under the duress, threat and coercion. However, we find that the authorised signatory of the appellant has suo moto reversed the credit. Thereafter, the appellant has taken the credit of same with intimation to the department. This cannot be done without following the appropriate procedure under Cenvat Credit Rules, 2004. Having not produced the documents at the strength of which credit was taken by the appellant before the adjudicating authority, we do not find that any ground for allowing such credit to the appellant - as the appellant has not only wrongly taken the credit of Cenvat credit and but also utilised the same which was not available to them under the Cenvat Credit Rules, the department has rightly issued the show cause notice under the provisions of imposition of interest and confirmed the same after following the adjudication process. Appeal dismissed - decided against appellant.
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2018 (11) TMI 297
Clandestine removal - case of the department is that the Polyester Texturised Yarn manufactured by M/s. Subhakti Textiles Limited was cleared without payment of duty to M/s. Samarpan Textiles Pvt. Limited and M/s. Bee Gee Leasing & Investment Pvt. Limited - entire defense of the appellant is that the entire case was made out on the basis of documents said to have been submitted under the covering letter dated 12/13.08.1997 by Shri R.R. Gupta - cross-examination of persons whose statements were relied upon - Principles of natural justice. Held that:- The letter dated 12/13.08.1997 could not be provided by the department to the appellants therefore, in the absence of such letter, the claim of the department that all the relied documents were submitted by Shri R.R. Gupta stands failed - As regards other documents relied upon such as, statements of various persons, it is found that when the appellant have seriously challenged the veracity of the documents submitted under letter dated 12/13.08.1997, it is incumbent on the part of the Adjudicating Authority to provide the cross-examination of the persons whose statements have been relied upon because when the relied upon documents said to have been submitted under letter dated 12/13.08.1997 are under serious doubt, then it is necessary to grant the cross-examination. As per Section 9D, the provisions are clear that, before relying on the statement of witness, it is essential on the part of the Adjudicating Authority to first examine the witness and then only such statement can be relied upon. In the present case, as per the above facts, when the documents itself are under doubt then the responsibility of the Adjudicating Authority for granting cross-examination gets increased - thus, the order passed by the Adjudicating Authority, without establishing the source of documents which were relied on and without allowing the cross-examination, cannot be sustained. Since there is serious violation of principle of natural justice, the matter needs to be reconsidered - appeal allowed by way of remand.
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2018 (11) TMI 296
Benefit of N/N. 67/95 denied - captive consumption - Pig iron captively for manufacture of other machinery items/parts, which were further used for repair and maintenance of machinery installed in the factory premises and assessee availed benefit of N/N. 65/95-CE dated March 16, 1995 - benefit of N/N. 67/95 denied on the ground of availment of exemption from duty in terms of N/N. 65/95 dated March 16, 1995. Held that:- The Notification No.217/86-CE as well as successor Notification 67/95 grants exemption to goods, which are captively consumed within the factory for manufacture of further goods, but the provisions of the Notifications excludes the benefit to inputs used in or in relation to the manufacture of final products, which are exempted from whole of duty of excise leviable thereon or are chargeable to nil rate of duty. The Tribunal in the case of Rastriva Ispat Nigam Limited [2002 (8) TMI 188 - CEGAT, BANGALORE], has held that in absence of any definition, the products consumed within the factory would continue to be intermediate products, even when the intermediate products are further captively consumed to manufacture other goods. Ultimately, when certain goods are cleared from the factory, only those goods are to be considered as final products, which are liable to payment of duty - The Tribunal held that so long as duty is paid on the final product, the mere fact that the duty was not paid on the intermediate products, would not disentitle the manufacture from the benefit of N/N 217/86-CE as well as successor Notification 67/95-CE. Revenue neutrality - Held that:- Even if the duty is held as payable on the pig iron used in the manufacture of intermediate products as per show-cause notices, the same will be available as credit to the respondents under the Cenvat Credit/Modvat Credit Rules. Consequently, this will lead to a revenue neutral situation. In such a scenario, there is no justification to demand of duty. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 295
Validity of second SCN - Extended period of limitation - sale through various consignment agents - Appellant were discharging their duty liability at the factory gate price - demand of differential duty - Held that:- Admittedly the appellant was issued with a show cause notice earlier on 27.04.2010 and as such subsequent show cause notices issued by invoking the longer period of limitation are not sustainable. However, a part of the demand covered by the show cause notice dated 26.03.2012 and the entire demand covered by the second show cause notice dated 08.01.2012 falls within the limitation period. As such while setting aside the demand for the longer period, the original adjudicating authority is directed to quantify the demand falling within the limitation period. Appeal allowed by way of remand.
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2018 (11) TMI 294
Extended period of limitation - reversal of Cenvat credit of duty availed in respect of inputs which was subsequently written off in the assessee’s booking account, on account of fact that the same has become obsolete - Held that:- The fact that the appellant’s factory went through an audit, raising an objection of the said fact of written off inputs, as also by appreciating the fact that the appellant is a public sector undertaking and there can be no intent to evade duty, we find favour with the appellant’s submission on the point of limitation. Tribunal in the case of Commissioner of Central Excise, Allahabad Vs Bharat Yantra Nigam Ltd. [2014 (7) TMI 370 - CESTAT NEW DELHI] has observed that unless there is sufficient evidence against a public sector undertaking to establish beyond doubt that a particular activity was being done with an intent to evade duty, the malafide intention cannot be attributed to such public sector undertaking. Appeal allowed on the point of limitation.
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2018 (11) TMI 293
Manufacture - process of manufacture of printed plastic pouches and printed laminated plastic films, out of films purchased from the market - NIL rate of duty under Tariff Item No.4911 of the Central Excise Tariff Act, 1985 - Held that:- The issue is no more res-integra and is decided in the case of M/S ESSAR PACKAGING PVT. LTD. & SHRI ATUL GOEL VERSUS COMMISSIONER OF CENTRAL EXCISE AND S.T., ALLAHABAD [2017 (6) TMI 368 - CESTAT ALLAHABAD], where it was held that The printed poly films do not attract Central Excise duty, further till 09.05.2008 laminated printed poly films did not attract Central Excise duty. Further, wef. 10.05.2008, printed laminated poly films fall under Tariff Item No.4911 and attract nil rate of duty. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 292
CENVAT Credit - various iron & steel items, paint & cement used by the appellant for manufacture of Supporting Structural - denial on the ground that the issue stands covered against them by the Larger Bench decision of the Tribunal in the case of M/s Vandana Global Ltd. V/s CCE, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - time limitation. Held that:- The Larger Bench Decision of M/s Vandana Global Ltd. on which the Authorities below have relied upon, has been declared by the Hon’ble Gujrat High Court as not a good law in the case of M/s Mundra Ports [2015 (5) TMI 663 - GUJARAT HIGH COURT] - CENVAT Credit allowed. Time Limitation - Held that:- The issue was not free from doubt and the precedent decisions prior to Larger Bench’s judgment was in favour of the assessee. Admittedly, in such a scenario, the appellant cannot be held guilty of any mala fide so as to invoke the longer period of limitation. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 291
Valuation - molasses used captively for further production of various spirits - final product was not leviable to duty of excise being a State Subject - Held that:- The appellant is unable, even at this stage to show that the molasses were being sold on the lower side in the market by other manufacturers - whereas ₹ 150/- per quintal price covers the period relevant for the purposes of the present appeal, the value shown as ₹ 75/- per quintal is for the subsequent period. He has also not been able to show that the said price of ₹ 220/- per quintal adopted by the Revenue is incorrect. Inasmuch as there is no evidence on record to show that the two prices adopted by Commissioner (Appeals) i.e. 150 220 is not the correct value, the adoption of the average of the said two prices by Commissioner (Appeals) is just and proper and no infirmity can be found - appeal dismissed - decided against appellant.
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2018 (11) TMI 290
Clandestine removal - Gutkha with brand name such as ‘Sahu Bharat, ‘Sahu Bharat Super’, Sahu Bharat Special’ - appellants’ request for cross-examination was denied by the then adjudicating authority - Principles of natural justice - Held that:- The present impugned order is in total violations of the directions of this Tribunal and without following the principles of natural justice and without application of mind - the impugned order is set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 289
Clandestine manufacture and removal - Cigarettes - contravention of Rule 4 of the Central Excise Rules, 2002 - extended period of limitation - penalty - Held that:- The unit was throughout under the physical control of Central Excise Officers who were posted in the factory of the appellant and they were supervising the manufacture and clearance of the goods and as provided under Rule 6 of Central Excise Rules, 2002, the Central Excise Officers were assessing duty payable before removal of the goods. Also, the investigation did not establish as to from where the raw material such as tobacco was obtained and to whom the goods were cleared and how the money was recovered out of alleged clandestine clearance of such goods - the Central Excise Duty is on manufacture and the clandestine manufacture of cigarette was not possible in view of the presence of Central Excise Officers within the factory. There are no grounds to establish that the quantity of cigarettes were manufactured by appellant on which demand of about ₹ 39 crores was raised - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 284
SSI benefit - fictitious firm - appellant has cleared the final products to two main customers by issuing documents in the name of three fictitious firms - demand of Central Excise duty on the basis of ledger obtained from the main customer - Held that:- It is evident that there are errors evident in the work sheets in which the demand has been quantified. The benefit of SSI Notification has also been un-justifiably denied. In these circumstances, the present case is required to be remanded once again to the adjudicating authority for requantification of the demand - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (11) TMI 288
Classification of an item - Ujala Supreme - Held that:- The issue would be covered by Schedule V of the Rajasthan Value Added Tax Act, 2003 as it is a consumer product cannot be countenanced on the strength of the decision of this Court in M.P. Agencies v. State of Kerala [2015 (3) TMI 787 - SUPREME COURT], wherein while dealing with the pari materia provision of the Kerala Value Added Tax Act, 2003, this Court has held the very same product to be an industrial input covered by Schedule III, Entry 155(8)(d) of the Kerala Value Added Tax Act, 2003 which is pari materia with the provisions of Schedule IV, Part-B, Entry 119 of the Rajasthan Value Added Tax Act, 2003 - SLP dismissed.
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2018 (11) TMI 287
Vires of Maharashtra Tax on Lotteries Act, 2006 - seeking restrain from levying and/or collecting tax on sale of lottery tickets in State of Maharashtra - Held that:- The term lottery has been defined under the Lotteries (Regulation) Act 1998 to mean a scheme, in whatever form and by whatever name called for distribution of prize by lot or chance to those persons participating in the chance, of a prize by purchasing tickets. When the Maharashtra Value Added Tax 2002 repealed the Bombay Sales Tax Act, the lottery tickets were excluded from the purview of said enactment. In the mean while, the Lotteries Regulation Act, 1998 came to be enacted by the Parliament to regulate the lotteries and to provide for matters connected therewith and incidental thereto. The said enactment prohibited the State Government from organizing, conducting or promoting a lottery. Section 4 of the said enactment authorized the State Government to organize, conduct or promote the lottery subject to the conditions stipulated therein. Section 5 of the said enactment authorized the State Government to prohibit the sale of tickets of a lottery organized, conducted or promote by every other State, meaning thereby that it empowered the State to forbid within its territorial limit, sale of lottery tickets of any other State. The said power under Section 5 of the Act resulted into several States prohibiting sale of tickets of other States and was subject matter of Writ Petitions in various High Courts. The said writ petitions ultimately were brought to the Hon'ble Apex Court wherein the Court was called upon to adjudicate the issue as to what is the character of State lotteries ? And if such lotteries are gambling in nature, does it lose its character as such when it takes on the cloak of State lotteries and whether it sheds its character as res extra commercium. The Hon'ble Apex Court in the case of SUNRISE ASSOCIATES VERSUS GOVT. OF NCT OF DELHI ORS. [2006 (4) TMI 118 - SUPREME COURT OF INDIA], considered the whole gamut of sale of lottery tickets in India, both private and State and examined the issue in the backdrop of the accepted position that basically lotteries are gambling and its business is res extra commercium and to shed off this in the interest of State, Revenue has been finding avenue to legitimise it through some legitimization under the law to eliminate the impediment in collecting the State Revenue and dilute, if possible, the exploitation of people - On a detail analysis of the entire business of Lottery carried out by private or by State, the Hon'ble Apex Court by keeping in mind the illimpact of the lotteries of the public at large in the country as well across the globe, took note of the fact that some permitted and protected lottery transactions under the garb of benefit for charitable purposes or augmenting State Revenues has always found its foundation in the Indian scenario. The State of Maharashtra enacted Act No.53 of 2006 to provide for levy and collection of tax on the lotteries and the matter connected therewith or incidental thereto. The said enactment was brought in force to provide for levy and collection of tax on lotteries of the State as well as lotteries of other States, conducted as per provisions of the Lotteries (Regulation) Act 1991 and which was marketed in the State of Maharashtra. The term Lottery was assigned the same meaning as assigned in the Lotteries (Regulation) Act 1998. The Division Bench in the case of N.V. Marketing Pvt. Ltd Vs. State of Maharashtra and ors [2009 (8) TMI 1242 - BOMBAY HIGH COURT] concluded that the power to tax in relation to the subject clearly mentioned in List II Entry 62 of Seventh Schedule of the Constitution and the same would not be available to be exercised by the Parliament relying upon residuary Entry i.e. Entry 97, specifically when Entry 62 of List II of Seventh Schedule specifically empowers the State Legislature to impose tax in relation to lotteries because admittedly lotteries are included within the ambit of the term betting . With the aforesaid reasoning, the Division Bench concluded that the said enactment was perfectly within the legislative competence of the State Legislature in light of the specific entry traceable in the State list relating to taxation and rejected the challenge as to the competence of the State legislature - there are no error in the observations of the Division Bench which is based on the foundation that since lottery is gambling, Entry 62 of List II gets attracted. The intention of the Parliament in introducing Section 5 in the said enactment is very apparent It authorizes the State Government to prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State. Resultantly, the State Government is empowered to prohibit or restrict within its State the sale of lottery tickets of any other State. The State has invoked Entry 62 of List II while enacting the impugned legislation. This entry specifically empowers the State to tax on betting and gambling. Though the learned Senior counsel made a serious attempt to submit before us that a presumption that lottery is betting and gambling, is erroneous but once the Division Bench of this Court had fallen back on Entry 62 of List II, we do not find any error in the said conclusion. There are no flaw in the observation of the Division Bench when it proceeds to hold that lottery falls within the purview of betting and therefore, Entry 62 List II is invoked by the State Legislature to enact a law imposing tax on betting and gambling. It is thus declared that the Maharashtra Tax on Lotteries Act 2006 is well within the legislative competence of the State legislature - petition dismissed.
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2018 (11) TMI 286
Non-issuance of 'C' Form under the Central Sales Tax Act, 1956 - natural gas purchased by the Petitioner from the supplier/ dealer in the State of Gujarat - concessional rate of Central Sales Tax at 2% - Held that:- Where it is possible to bifurcate and/or measure the use of natural gas in generation of power, the benefit of 'C' Form to the extent of its user in generation of electricity, is to be granted. This on facts has been found to be possible by the report submitted by Mr. Vitthal S. Marwade, Deputy Commissioner of Sales Tax. In fact, he has recommended/ proposed grant of 'C' Form to the extent natural gas is used in generation of electricity - In case, a part of the inputs are used in items not entitled to its benefit respect of applications for 'C' Form already made, Respondent will file an affidavit of its Managing Director of the extent of user of natural gas in generation of power with the Respondents in support of its pending applications. Whether at the stage of application for 'C' Form made by Registered dealer, is adjudication called for? - Held that:- Once, the Petitioner is registered as a dealer under the Act, then that registration permits/ allows the dealer to purchase the goods mentioned therein from outside the State and seek concessional rate of tax by applying for issue of 'C' Form to the Respondent Nos.1 and 2. Prima facie, Respondent Nos. 1 and 2 are obliged to grant/issue the same - The natural gas obtained/ purchased from the dealer in the State of Gujarat are not used for the intended purposes namely – generation of power to the extent declared by the Petitioner, then it would be open to the Respondent to invoke the provisions of the Act and the Rules framed thereunder for the purposes of imposing penalties. The grant of interim relief will not prohibit the Respondents from making enquiries to the extent of use of the natural gas for the stated purposes i.e. generation of electricity. Thereafter, if required, Respondent are at liberty to move this Court for variation of this order - till the final disposal of this Petition, there shall be adinterim relief in terms of prayer clause.
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