TMI Tax Updates - e-Newsletter
December 11, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• Separate GST registration is not required for imports received at Haldia Port Kolkata for Mumbai head office, cab be cleared anywhere.

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• Additions of Gift u/s 56 - surrender of the rights of shares in favour of the another close relative is exempted u/s 56(2)(vii)(c)

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• Service tax - inclusion of material supplied free of cost by the service provider in assessable value of works contract confirmed by SC

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Articles

1. APPLICABILITY OF GST TO UPFRONT CONCESSION FEE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Streamlining of National Pension System (NPS)

2. DRI continues to crackdown on Gold Smuggling – 66 KGof smuggled gold valued at about ₹ 21 crore seized

3. Direct Tax Collections for F.Y. 2018-19 up to November, 2018

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/CMD1/CIR/P/2018/0000000149 - dated 7-12-2018

Disclosure of significant beneficial ownership in the shareholding pattern

2. CIR/MRD/CSC/148/2018 - dated 7-12-2018

Cyber Security and Cyber Resilience framework of Stock Exchanges, Clearing Corporations and Depositories

Highlights / Catch Notes

GST

• Car Detention for Missing E-Way Bill Deemed Illegal; New Car with Temporary Registration Not Considered Used.

  Case-Laws - HC : E-way bill - purchase of car from another state - personal effects - temporary registration in the selling state - can brand new car be treated as used car - detention of car due to omission to upload e-way bill is illegal.
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• No separate GST registration needed for Mumbai office imports at Haldia Port, Kolkata; invoice clearance is sufficient.

  Case-Laws - AAR : Levy of GST - Separate registration is required or not - imports received at Haldia Port Kolkata for Mumbai head office - the applicant can clear the goods on the basis of invoices issued by the Mumbai Head Office and therefore they need not take separate registration in the State of West Bengal.
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• GST at 18% Applies to Entire Contract for 220kV Underground Cable Work, Including Transportation Services.

  Case-Laws - AAR : Exemption from GST - supply of transportation services - The Applicant is engaged in the work of Supply, Laying and Terminating of 220kV U/G cables package to the recipient. - entire contract is liable to GST @18%.
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• Applicant Must Pay GST on Building Value Transferred to Landowner in Joint Development Agreement.

  Case-Laws - AAR : Levy of GST - land development agreement - The applicant is liable to pay GST on the value of building constructed and handed over to the land owner in terms of the Joint Development Agreement.
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• Builder and Landowner Liable for GST on Multistoried Residential and Commercial Building Transactions.

  Case-Laws - AAR : Levy of GST - landowner - The builder offered to develop and promote a multistoried residential apartment cum commercial building in the property - premises allotted to him, which he intends to distribute among his family members - He is liable to GST
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• GST Not Applicable on Construction Services If Payment Received After Property Completion Date.

  Case-Laws - AAR : Levy of GST - Construction services - relevant date of completion of construction of the property - If the entire consideration is received after the date of completion, then the transaction would not be liable to GST.
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Income Tax

• Court Rules Exchange Fluctuation Loss as Revenue Expenditure, Not Affecting Asset Depreciation Cost.

  Case-Laws - AT : Claim towards exchange fluctuation loss - for the purpose of depreciation, the cost of asset cannot be reduced or increased due to exchange rate fluctuation - allowed as revenue expenditure.
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• Deemed Dividend Defined: Section 2(22)(e) includes indirect benefits; partial relief overturned, income additions confirmed.

  Case-Laws - AT : Deemed dividend addition u/s 2(22)(e) - a narrow definition to the word ‘’individual benefit’’ cannot be given. The benefit will include direct or indirect things. Partner whose friend’s wife received the advance had indirectly benefited from the advance received by the assessee from the company - Partial relief given by CIT(A) is not justified - Additions confirmed.
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• Close relatives' gifts and rights surrender exempt from Section 56(2) of the Income Tax Act.

  Case-Laws - AT : Additions u/s 56 - The gifts received from the close relatives u/s 56(2)(v) are outside the scope of 56(2). - The surrender of the rights of the close relatives in favour of the another close relative is covered for exemption u/s 56(2)(vii)(c) of the Act.
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• Assessee Can Select 'Initial Assessment Year' for Section 80IA Deduction; Previous Losses Cannot Offset Eligible Business Profits.

  Case-Laws - AT : The assessee had the option to opt for the 'Initial assessment year' for claiming deduction u/s 80IA and hence, loss or depreciation in the year earlier to 'initial assessment year' already absorbed against the profit of other business could not be notionally brought forward and set off against the profits of the eligible of the assessee
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• Tax Deduction Denied for Director's Son's Overseas Education Expenses; Not a Business Expenditure Under Tax Rules.

  Case-Laws - HC : Disallowing the business expenditure claimed as incurred for the higher education abroad of the son of a Director of the assessee company, who was also the Managing Director of a subsidiary company - Expenses not allowed.
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• Software Development Costs Qualify for Deduction Under Income Tax Act Section 37 as Revenue Expenditure.

  Case-Laws - AT : Software development expenditure which was application software was revenue in nature - deduction allowed u/s 37.
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SEBI

• SEBI Enforces Cyber Security Framework for Exchanges and Depositories to Strengthen Market Infrastructure Against Cyber Threats.

  Circulars : Cyber Security and Cyber Resilience framework of Stock Exchanges, Clearing Corporations and Depositories
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• SEBI Mandates Disclosure of Significant Beneficial Ownership to Enhance Corporate Governance and Transparency in Shareholding Patterns.

  Circulars : Disclosure of significant beneficial ownership in the shareholding pattern
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• New Cybersecurity Guidelines for Stock Exchanges and Depositories: Regular Assessments, Incident Reporting, and Security Controls Required.

  Circulars : Cyber Security and Cyber Resilience framework of Stock Exchanges, Clearing Corporations and Depositories
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Service Tax

• No Penalty u/s 78: Good Faith Belief Services from SEZ Unit Not Subject to Service Tax.

  Case-Laws - AT : Penalty u/s 78 - they were under bonafide belief that service provided from SEZ unit is not chargeable to Service Tax. Therefore the payment of Service Tax was escaped under bonafide belief without any malafide intention. - no penalty.
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• Appellant Loses Immunity from Interest and Penalties After VCES Claim Rejection.

  Case-Laws - AT : Voluntary Compliance Entitlement Scheme - With the said rejection, the immunity from interest and penalty as was available to the appellant under VCES Scheme was no more available to them.
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• Service Tax Levied on Management Services for Clean Development Mechanism and Sale of Emission Reduction Certificates Confirmed by Tribunal.

  Case-Laws - HC : Management or Business Consultant Service - assistance in implementing Clean Development Mechanism (CDM) - sale and management of certified emission reduction certificates (CERs) - order of tribunal for levy of service tax confirmed
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• Supreme Court Upholds Inclusion of Free Materials in Works Contract Service Tax Valuation, Confirms CESTAT Decision.

  Case-Laws - SC : Works contract service - valuation - inclusion of material supplied free of cost by the service provider in assessable value - CESTAT has confirmed the demand - SC dismissed the appeal of the assessee.
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Central Excise

• Refund Approved for Cenvat Credit on Inputs Used in Exempt Export Goods Under Bond/LUT.

  Case-Laws - AT : Refund of accumulated credit - inputs used in the exempted export goods - even though the finished goods are exempted, the same is allowed to be exported under Bond/ LUT. Therefore, the availment of Cenvat Credit by the respondent is not objectionable - refund is allowed.
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• Appellant Takes Suo Moto CENVAT Credit Due to Deputy Commissioner's Inaction; Claims Harassment by Departmental Officer.

  Case-Laws - AT : CENVAT Credit - defective goods returned by the customer - The Deputy Commissioner has not acted on the the request, therefore, the appellant have taken suo moto credit - it is clear case of harassment to the assessee by the departmental officer.
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• Tinting Paints is Legally Manufacturing per Central Excise Act, Section 2(f)(iii.

  Case-Laws - AT : Process amounting to manufacture or not - process of tinting i.e. mixing the base paint with the colourants to obtain the paint of desired shade - The said activity is amount the manufacture by the fiction of the law as per section 2(f) (iii) of Central Excise Act, 1944.
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• Cenvat Credit Permitted for Education and Secondary Cess Payment, Confirms Court Decision.

  Case-Laws - AT : Utilization of Cenvat Credit of basic excise duty - appellant is clearly entitled for utilization of Cenvat Credit of basic excise duty for payment of Education Cess / Secondary and Higher Education Cess
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• Court Rules Perfumery Compound Falls Under Tariff Heading 3302, Not 3303, Affecting Excise Tax Treatment.

  Case-Laws - AT : Classification of goods - fragrances (Perfumery compound) - The product perfumery compound manufactured by the appellant is correctly classifiable under 3302 and not under 3303 as claimed by the Revenue
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• Family Brand Use Qualifies for SSI Exemption; Appellant Wins Case on Shared Brand Name Entitlement.

  Case-Laws - AT : SSI Exemption - use of Brand Name of other person - The appellant is using brand name which is also used by other family members cannot be said that the appellant is using the brand name of other persons - benefit of SSI Exemption is to be allowed
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• Court Sets Aside Cenvat Credit Reversal Demand for By-Product Waste u/r 6(3)(b) of 2004 Rules.

  Case-Laws - AT : Reversal of Cenvat Credit - Iron fills as are emerging as a by-product but an inevitable waste due to being segregated during the manufacture of the final product, the appellant is not liable to be vested with any liability on account of Rules 6 (3) (b) of CCR, 2004 - demand set aside.
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• Interest on Delayed Duty Refunds: Compliance with Section 11BB of Central Excise Act Achieved if Issued Within Three Months.

  Case-Laws - AT : Interest on delayed refund - Refund of duty paid in excess - if the amount is refunded within 3 months of the order of Tribunal, the same will be in consonance with the principle as contained under Section 11BB of CEA, 1944.
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VAT

• Input Tax Credit Allowed for Generator Sets as Capital Goods in Electricity Generation, Clarification Issued by Department.

  Case-Laws - HC : Input tax credit - purchase of Generator sets and its parts which are capital goods and used in the generation of electricity - as the same is available in terms of the clarification issued by the department itself, credit allowed.
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• Medical Supplies Integral to Healthcare Services, Not Taxable Sales, Says Interpretation on VAT Classification.

  Case-Laws - HC : Levy of tax - sale or not - health care services - The supply of drugs, medicines, implant, stents, valves and other implants are integral to a medical services/procedures and cannot be severed to infer a sale
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• VAT on Dyeing Chemicals: Only Transferred Portion Taxable, Not Entire Value.

  Case-Laws - HC : Levy of Tax - chemicals used as consumables in the process of job work of dyeing of fabric - The tax on the entire value of chemicals consumed during the process of dyeing and job work are not to be included for the purpose of levy of VAT as substantial portion of the same is not transferred to the principal eventually.
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Case Laws:

• GST

• 2018 (12) TMI 536
  Levy of GST - Construction services - relevant date of completion of construction of the property - supply of services - GST on any amount received as consideration towards sale of completed offices, after the date of completion, where part of the consideration was received prior to the date of completion - GST on the consideration received as consideration towards the sale of completed offices, where the entire consideration is received after the date of completion of construction. Relevant date of completion of construction of the property - Held that:- Entry No.5 of Schedule II of CGST Act 2017, which stipulates that any construction of a complex or building or a civil structure or a part thereof would be treated as a supply of service and the constructions where the entire consideration has been received after the issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, are exempt - The stress here is on the words entire consideration ; after the issuance of completion certificate by the competent authority, where required and first occupation . The crucial aspect which decides the tax liability is the date of completion certificate or first occupation, whichever is earlier, issued by a competent authority. It is thus clear that the occupancy certificate. which is a legal requirement, would act like a completion certificate and hence the date of such occupancy certificate would be deemed to be the date of completion. Therefore the chartered engineer s certificate can t be a substitute for Completion Certificate / Occupation Certificate, required by the CGST Act 2017. Hence the Chartered Engineer s certificate has no relevance to the question - the date of Occupancy Certificate issued by the Bruhat Bengaluru Mahanagara Palike, competent authority in the instant ease, shall be considered as the date of completion of the property and if the entire amount Of consideration has been received after such date of completion, then that would not be treated as a taxable service, If any part of the consideration is received before such date, then the transaction would be treated as a supply of service as per clause 5 of schedule II to the GST Act and attracts the levy of GST. What constitutes first occupation ? - Held that:- The word first occupation is not defined anywhere in the Act. The Bengaluru Mahanagara Palike Building Bye-Laws 2003, under clause 5.7, stipulates that nobody can occupy the building or portion of the building until the Occupancy Certificate is obtained from the competent authority - the relevant date, in the instant case, would be the date of occupancy certificate or the first occupancy, which can only be after the date of occupancy certificate, whichever is earlier. In the instant case the competent authority i.e. B.B.M.P., Bengaluru issues the completion certificate in the name of Occupancy Certificate and hence the date of occupancy certificate need to be considered - the date of first occupation is irrelevant to the instant case hence can h be considered at all as the completion certificate ( Occupancy Certificate ), is required to be obtained mandatorily by the applicant from the competent authority i.e BBMP, Bengaluru, Karnataka. Ruling:- The date of Occupancy Certificate issued by the competent authority, i.e. Bruhat Bengaluru Mahanagara Palike should be treated as the date of completion of the construction. If any part of the consideration is received before such date of completion, then the transaction would be considered as the supply of services in terms of entry 5 of Schedule II to the GST Acts, and liable for GST. If the entire consideration is received after the date of completion, then the transaction would not be liable to GST.

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• 2018 (12) TMI 535
  Levy of GST - landowner - The builder offered to develop and promote a multistoried residential apartment cum commercial building in the property - premises allotted to him, which he intends to distribute among his family members - Held that:- The applicant, being the person Who has supplied development rights to a developer in respect of his land, is liable to registration and payment of tax - Section 22 of the CGST Act 2017 tells about the persons liable for registration and stipulates that Every supplier, who makes a taxable supply of goods or services or both, shall be liable to be registered, if his aggregate turnover crosses the threshold limit prescribed in the Act. The applicant has not furnished any information with regard to transfer of possession of the constructed flats / commercial area or allotment order of the same, in the instant application and hence the authority presumes that the possession of the constructed flats / commercial area has not been handed over to the Applicant, as on date - the Applicant is supplier of a taxable service by way of transfer of undivided share of land and hence is liable to register himself and discharge the tax accordingly. The applicant being the land owner is liable to pay GST on premises allotted to him, which he intends to distribute among his family members.

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• 2018 (12) TMI 534
  Levy of GST - value of building constructed and handed over to the land owner in terms of the Joint Development Agreement - value of GST to be paid since there is no monetary consideration involved - Liability of service tax up to 30.06.2017. Held that:- In the instant case the applicant, a registered person, is supplying the construction service of building / civil structure to supplier of the development rights (the land owner) against consideration in the form of transfer of development rights. N/N. 4/2018-Central Tax (Rate) dated 25.01.2018, at para (b), stipulates that the supplier of construction service, to the supplier of development rights, is liable to pay GST for the service provided to the land owner in terms of the Joint Development Agreement - The applicant needs to pay tax towards the construction service provided to the land owner, on the value to be determined in terms of para 2 of the N/N. 11/2017-Central Tax (Rate) dated 28.06.2017. Liability to pay service tax up to 30.06.2017 - Section 142 (11) of the CGST/ KGST Act 2017 - Held that:- It is clearly evident from Section that the service tax is liable to be paid, which is leviable under the Finance Act 1994, on the services provided up to Also the GST is liable to be paid under the CGST Act 2017 /KGST Act 2017, on the services provided after 01.07.2017 - the Applicant has to pay service tax / GST proportionate to the services provided before / after respectively. Ruling:- The applicant is liable to pay GST on the value of building constructed and handed over to the land owner in terms of the Joint Development Agreement. The value on which the applicant is liable to pay GST is to be determined in terms of para 2 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The Applicant is liable to pay service tax / GST proportionate to the services provided before / after 30.06.2017 respectively.

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• 2018 (12) TMI 533
  Exemption from GST - supply of transportation services - The Applicant is engaged in the work of Supply, Laying and Terminating of 220kV U/G cables package to the recipient. - Sl. no. 18 of the Notification No. 12/2017 - Central Tax (Rate) dated 28th June, 2017 - composite supply or not - Held that:- In the present application the applicant has stated and claimed that that they are engaged in the work of supply, laying and terminating of 220 KV U/G cables package to the recipient and the engagement comprises of two separate agreements with respect to supply of goods and services - also, the applicant in their application has clearly stated that each of the contracts referred above consists of a Cross Fall Breach Clause deeming any breach in either of the contract would be a breach of the other contract as well and would provide the recipient with an adsolute right to terminate both the contracts or claim damages. The applicant is not transporting the goods but is hiring the services of a GTA to undertake the transportation of goods by road is claiming to be discharging GST liability under Reverse Charge Mechanism and in such a situation he is a recipient of such service and is not a supplier thereof. The first contract referred to above includes ex-works supply of all equipments and materials which includes testing and supply of cable package required for successful commissioning - the second contract consists of all other activities required to be performed for commissioning of the project which also includes transportation, insurance, etc. Thus, it is concluded that as per the first and second contracts referred above there is no doubt that both these contracts consisting of cross fall breach provisions are in the nature of Composite supply of Works Contract which is a service would be taxable@ 18% in terms of Sr. No. 3(11) of Notification No. 11/2017-Central tax (Rate) dated 28.06.2017 artificial bifurcation of contracts scope of work as claimed by the applicant to go out of the scope of correct tax liability is not legal and proper. Ruling:- The supply of transportation services, rendered by the Applicant, will not be exempt from the levy of GST in terms of Sl. no. 18 of the Notification No. 12/2017 - Central Tax (Rate) dated 28th June, 2017

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• 2018 (12) TMI 532
  Levy of GST - Separate registration is required or not - raising of invoice from Mumbai Head Office for imports received at Haldia Port Kolkata where there is no separate GST Registration - place of supply - mention of GSTIN of Mumbai and Dispatch place of Haldia Port in e-way bill - Held that:- Firstly, since the applicant will be importing the goods into India as per Section 7(2) of the IGST Act, 2017, such supply of goods imported into India shall be treated as supply of goods in the course of Inter State Trade or commerce - Secondly in respect of goods imported into India, as per Section 11(a) Of the IGST Act, 2017, the place of supply shall be the location of the importer and in the present case since the importer is registered in Mumbai, the place of supply shall be Mumbai, Maharashtra. In the present case, the place of supply is the location of the importer who is situated in the State of Maharashtra and hence the applicant will be clearing the goods by paying IGST form their GSTIN issued in Mumbai, Maharashtra. Since the applicant has no establishment or place of operation or any godown or GSTIN in the State of West Bengal i.e. the port of import, therefore, after exbonding of imported goods from the Customs warehouse at Kolkata and for further sales after exbonding, Whether that would be interstate or intrastate supply would depend upon the place of supply of goods as per Section 10 and Section 11 of the IGST Act, 2017. Thus, the place from where the applicant makes a taxable Supply of Goods shall be his location, in this case, the Mumbai Head Office and since the applicant does not have any godown in the state of West Bengal and we feel that the applicant can clear the goods on the basis of invoices issued by the Mumbai Head Office and therefore they need not take separate registration in the State of West Bengal. Since as an importer the place of supply for the applicant in this case will be Mumbai, and the goods also will be cleared on the name of the Mumbai registered address while paying IGST at the time of Customs Clearance, it would follow that they can do the further transaction mentioning the GSTIN of their Mumbai office - they can do the transaction on Mumbai Head Office GSTIN and can mention the GSTIN of Mumbai Head Office in the E-way Bill and dispatch place as Customs Warehouse, Kolkata. Ruling:- The procedure to raise the invoice from Mumbai Head Office for imports received at Haldia Port Kolkata where there is no separate GST Registration and Charging of IGST from Mumbai to our Customers is correct - For this transaction, no separate registration in the State of West Bengal is required. It is correct to Mention the GSTIN of Mumbai and Dispatch place of Haldia Port in e-way bill.

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• 2018 (12) TMI 531
  E-way bill - purchase of car from another state - personal effects - temporary registration in the selling state - can brand new car be treated as used car - detention of car due to omission to upload e-way bill - place of supply of goods - whether the omission to upload e-way bill with respect to the transport of a car purchased in Puthuchery, by a person normally residing in Thiruvananthapuram, attracts Section 129 of the Kerala State Goods and Services Tax Act, 2017? Held that:- When, a resident of Trivandrum purchases a car in Puthuchery, takes possession of the same, obtain temporary registration in his name and takes out an insurance cover for a period of one year, also in his name; which insurance cover is mandatory under Section 146 of the M.V. Act, the presumption can only be that the delivery was effected in Puthuchery itself. All of these factors indicate that the transfer of property in goods vests with the purchaser, at Puthucherry itself, wherein the supply terminated. The registration obtained in one State is also effective throughout India by virtue of Section 46 of the M.V. Act. This is the volition of the purchaser and the movement of the goods after the supply has terminated, in accordance with Sections 7 8, read with Section 10 of the IG ST Act is not the concern of the taxing authorities or even the motor vehicle authorities, the latter of whom is only concerned with the permanent registration being made within the State in which the vehicle is proposed to be used. The requirement also is that, necessarily the vehicle would have to be permanently registered in the State in which the purchaser has his residence or place of business and normally intends to keep it for use as provided in Section 42 of the M.V. Act. It was perfectly possible for the dealer to have transported the vehicle on the strength of a trade certificate but however, made the delivery of the vehicle in Thiruvananthapuram only after taking either a temporary registration or a permanent one from the registering authority having jurisdiction over Thiruvnanathapuram. Here, undoubtedly the vehicle was temporarily registered at Puthuchery. It cannot be said that the temporary registration cannot decide the aspect of sale, especially when the temporary registration was taken out in the name of the purchaser. If the vehicle need not be moved out of the dealership for the purpose of temporary registration, the question arises as how it ran for 17 kilometers; obviously after the registration. The transfer of property of goods was occasioned on the temporary registration being made, but, however, the seller-dealer understood it as an inter-state sale since the purchase was intended for use in a State other than the State from which the sale was effected. The purchaser had also paid IGST, a portion of which would be accrued to the State in which eventually the car would be used. The sale made by the dealer and the service of transportation of the vehicle are quite distinct transactions; one of supply of goods and the other of service. The transport cannot be understood as one in the course of sale for the purpose of supply at Thiruvananthapuram.The service of transportation was for a consideration on which also tax was paid by the dealer. The transportation was by the logistics wing of the selling dealer who had collected tax on the consideration for the service rendered. Though a temporary registration it has to be noticed that there is absolutely no enabling provision, though also no prohibition, in getting a permanent registration of the vehicle by yet another person. We also have to notice that even if such a provision existed, a second sale of the motor vehicle is not taxable within the State, unless there is a premium on the original sale price as seen from Notification No.8/2018 Central Tax-(Rate). Hence on these two grounds, of an intra-State sale having occasioned and the transport being of used personal effects, we find that the detention was illegal. Having found the detention to be without sanction of law, the vehicle having been already released, what remains is to quash the notice issued and the order passed, under Section 129, both being illegal and totally without jurisdiction - appeal allowed.

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• Income Tax

• 2018 (12) TMI 530
  Disallowing the business expenditure claimed as incurred for the higher education abroad of the son of a Director of the assessee company, who was also the Managing Director of a subsidiary company and who was later appointed as a Director of the assessee company itself - Held that:- Here the son of the Director of the assessee company, send for higher studies was a Managing Director in one subsidiary company. Definitely the subsidiary company could have claimed the expenditure as business expenditure, but, not the assessee Company. The contention raised, based on the resolution passed by the subsidiary company at Annexure B cannot be upheld. Annexure B resolution indicates that the subsidiary company had agreed to lend the person on deputation basis after his study in USA to the assessee company for a period of ten years. The decision taken by the subsidiary company does not bind the holding company. There is also no resolution seen of the holding company, deciding to send the Managing Director of the subsidiary company for higher studies and then take him into the fold of the holding company itself, by reason only of the education he acquired in the foreign country. The further resolution at Annexure C is by the assessee company wherein the Board merely agreed to reimburse the expenses. This again would be only by reason of love and affection the Board Members have, towards the person deputed especially noticing the fact that it is a closely held private limited company wherein all the Directors are siblings or closely related. - Decided in favour of the revenue.

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• 2018 (12) TMI 529
  Block assessment u/s 158BC - Search was conducted in the various business premises, jewelries of the assessee, at different locations, all partnerships firms with the siblings as partners, as also residence of the partners on 20.11.2001 under Section 132 - Held that:- On a verification of the details as produced by the partners and their return of income found that the figures in the books of the assessee tallies with the figures as seen from the individual returns of the partners and their wives. It was in such circumstance, that the First Appellate Authority modified the assessments and while retaining certain additions deleted the major portion. The Tribunal also found favour with the First Appellate Authorities order. As far as the rectification and addition made in the course of such rectifications the assessee was issued with notice and only later, the Assessing Officer made the additions. However that also, related to the credit found in the name of the partners in the capital account of the assessee firm which again stood explained by the individual returns of the partners for the various years as produced before the First Appellate Authority. We do not think any interference need be caused to the findings on facts as entered by the First Appellate Authority and confirmed by the Tribunal. We do not see any question of law arising from the orders of the Tribunal.

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• 2018 (12) TMI 528
  Addition towards share premium u/s 68 - summons issued u/s 131 remained uncomplied and the assessee did not produce the directors of the investor companies before the AO - Held that:- The issue under dispute was the subject matter of adjudication on exactly similar facts by this tribunal in the case of ITO vs Trend Infra Developers Pvt Ltd [2018 (11) TMI 1131 - ITAT KOLKATA] for Asst Year 2012-13, wherein the addition made towards share premium was deleted concluding that only grievance of the AO was that the assessee could not produce the directors of the share subscribing companies In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon’ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd.[1986 (3) TMI 3 - SUPREME COURT] - Decided in favour of assessee.

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• 2018 (12) TMI 527
  Admission of additional evidence - addition on account of Sundry Creditors - non producing books of accounts - Held that:- In view of the submission of the Ld. Counsel, and in the interest of Justice, we feel it appropriate to admit the additional evidences and restore the matter in dispute to the Ld. CIT(A) for deciding a fresh after analyzing the documents or the evidences, which the assessee may file before him. CIT(A) may call for remand report from the Assessing Officer - no books of accounts were produced during the assessment proceeding, therefore we direct the assessee to produce all the books of accounts along with vouchers for the year under consideration before the authorities - direct the assessee to produce confirmation of the creditors along with their copy of ledger accounts, complete narration of the transaction alongwith documentary evidences, and also produce those sundry creditors before the authorities for verification of the their existence and transactions of the assessee with them. To verify and ascertain facts in respect of the issue in dispute, if the authorities feel it necessary, they may carry out enquiries from the real estate companies, from whom the assessee received commission and also from the customers to whom the commission has been passed over. - Decided in favour of assessee for statistical purposes. Disallowance of advertisement expenditure - failure of the assessee to produce bills of those expenses - Held that:- We find that issue in dispute related to sundry creditors has already been restored to the file of the Ld. CIT(A). This disallowance has been confirmed on the ground that no bills or other documents in support of the expenditure have been produced before the authorities. In the interest of substantial Justice, we feel it appropriate to give one more opportunity to the assessee to produce the bills of documents in support thereof, accordingly, we restore this issue to the file of the Ld. CIT(A) for deciding afresh - Decided in favour of assessee for statistical purposes.

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• 2018 (12) TMI 526
  Claim of deduction u/s 80IA - brought forward losses have to be adjusted against the current year income before calculating the eligible amount of deduction under section 80IA - Held that:- Once the assessee has opted for the first year of relief then it continues for further 9 consecutive years. The section mandates that the year in which the relief is claimed under this section for the first time is called as the initial assessment year. This will be the year in which the undertaking has to be treated as a separate sole source of income within meaning of s.80IA(5) of the Act and, therefore, depreciation and loss of earlier years cannot be notionally carried forward to be set off against income of the initial assessment year for computing deduction under section 80IA of the Act CIT(A) following the decision of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT [2010 (3) TMI 860 - MADRAS HIGH COURT] and CBDT circular No. 1/2016 and in ITAT decision in the case of The Tata Power Co. Ltd vs. ACIT [2011 (5) TMI 236 - ITAT MUMBAI] allowed the Claim of the assessee Since, there is no dispute about the dates of commissioning of the windmills under consideration and Initial Assessment Year in which the deduction u/s 80lA of the Act was claimed by the assessee in respect of these Windmills, considering the fact that the Appellant's case is squarely covered by the above decisions of Hon'ble Madras High Court and Mumbai ITAT, it is held that the assessee had the option to opt for the 'Initial assessment year' for claiming deduction u/s 80IA and hence, loss or depreciation in the year earlier to 'initial assessment year' already absorbed against the profit of other business could not be notionally brought forward and set off against the profits of the eligible of the assessee. The Ground is accordingly Allowed. See HERCULES HOISTS LTD. [2015 (5) TMI 825 - BOMBAY HIGH COURT] - Decided against revenue.

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• 2018 (12) TMI 525
  Revision u/s 263 - audit objection basis for taking up the revision - transfer of shares physically, in the event of family arrangements - excess share premium for the transactions between the relatives which required to be taxed u/s 56(2)(vii)(b) - Held that:- As gone through the provisions of 56(2)(vii)(c) and this provision was brought as an anti-abuse measure, seeks to tax the understatement in consideration as the income in the hands of the recipient (of the corresponding asset) as against the donor in the case of Gift Tax Act. The transactions between close the relatives are outside the scope of application of 56(2)(vii)(c). The legislature in its wisdom excluded the transaction of close relatives for the purpose of taxation under the income from other sources. Even the gifts received from the close relatives u/s 56(2)(v) are outside the scope of 56(2). Though the shares are allotted to the assessee, the entire shareholding of the company is retained by the family and no share was allotted to the outsiders. In this case, though the assessee had received the excess shares, renouncement was from the close relatives and the assessee is at liberty to transfer the shares to other relatives or shareholders at any point of time without attracting the taxation u/s 56(2)(vii)(c). Therefore, surrender of the rights of the close relatives in favour of the another close relative is covered for exemption u/s 56(2)(vii)(c) of the Act. In the basis of audit objection in the instant case, it is evident from the order u/s 263 that the case was taken up for revision on the basis of audit objection. The Revenue did not bring any other decision of Hon’ble Apex Court or the jurisdictional High Court to support their view. Therefore, respectfully following the decisions cited supra, we hold that the audit objection is not the basis for taking up the revision under section 263 and the Pr.CIT is not permitted to take up the case for revision only on the basis of audit objection. Respectfully following the view taken in SOHANA WOOLLEN MILLS. [2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT] and the Coordinate Bench of ITAT Chandigarh, we are unable to sustain the order of the Ld. Pr. CIT and accordingly, we set aside the order of the Ld.Pr. CIT and allow the appeal of the assessee. Since we have decided the appeal in favour of the assessee on application of section 56(2)(vii)(c) of the Act in case of close relatives and on audit objection, we consider it is not necessary to adjudicate the remaining grounds/ propositions put forth by the Ld.AR during the appeal hearing. Accordingly, the appeal of the assessee is allowed.

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• 2018 (12) TMI 524
  Assessment u/s 153A - Addition towards share capital / share application money and share premium in the search assessment in the absence of any incriminating material found during the course of search to that effect - unabated assessments - Held that:- The assessment framed u/s 143(1) of the Act for the Asst Year 2009-10, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share application money u/s 68 of the Act is hereby directed to be deleted. Since the issue is addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the addition u/s 68 of the Act for the Asst Year 2009-10. - Decided in favour of assessee.

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• 2018 (12) TMI 523
  Assessment u/s u/s.153A - addition u/s 68 - unabated assessment - Held that:- The assessment is unabated as the return of income u/s.139 of the Act filed on 30.09.2009, whereas the time limit for issue of notice u/s.143(2) of the Act is on 30.09.2010 and the date of search u/s.132 of the Act dated 06.08.2014 and at the time of search the assessment was completed and no incriminating material was found as per record. Therefore, we having considered the facts of the case and also the observations of both the lower authorities and the decision of the coordinate bench of the Tribunal referred above, are of the substantive opinion that the assessment is unabated and the Tribunal is bound by the judicial precedence and, hence, applying the ratio of decision to the present case, we allow the cross objections filed by the assessee.

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• 2018 (12) TMI 522
  Deemed dividend addition u/s 2(22)(e) - CIT-A allowed partial relief - Held that:- Assessee could not have advanced the loan of Rs. 3,00,00,000/-, if she was not closely related to one of the partners. No doubt, ld. Authorised Representative argued that such loan given to Sm. Priya Racherl did not individually benefit any partners or firm and hence Section 2(22) (e) of the Act would not apply. However, we are of the opinion that such a narrow definition to the word ‘’individual benefit’’ cannot be given. The benefit will include direct or indirect things. Partner whose friend’s wife received the advance had indirectly benefited from the advance received by the assessee from M/s. Symbiotic Infotech P. Ltd. We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) fell in error in giving relief of Rs. 3,00,00,000/- to the assessee. We dismiss the grounds 6 to 10 of the assessee and allow the appeal of the Revenue. Disallowance of interest expenditure - interest relatable to term loan having been fully utilized for acquiring immovable property in the name of assessee firm for its business purposes - Held that:- It is not disputed that there was a net overdrawing of Rs. 1,70,69,208/- in partners accounts, if considered together, as on date of obtaining the loan viz 12.11.2011. It may be true that the loan was immediately put to use for the purpose of acquiring property. However, if the partners had not overdrawn by Rs. 1,70,69,208/-, assessee could have saved atleast the interest on such amount. In other words, we cannot say that there was full utilization of loans taken by the assessee for the purpose of its business. As already mentioned by us, assessee itself had admitted before ld. CIT (Appeals) that cash credit account was not used for the purpose of business. In such circumstances, we are of the opinion that CIT (A) was justified in sustaining Addition - decided against assessee.

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• 2018 (12) TMI 521
  Unexplained cash credits u/s 68 - exemption u/s 10(38) denied - bogus share capital gain - Held that:- Assessee specifically requested for cross-examination of the deponents whose statements were the basis of addition by the AO and also the report of the Investigation Directorate, Kolkata for rebuttal; the judicial decisions cited, we find that the issue for consideration is squarely covered by the orders of the Bengaluru ITAT in the cases of Arvind Kumar Moolchand [2017 (5) TMI 1643 - ITAT BANGALORE] and Pukhraj Hasmuchlal [2018 (1) TMI 1406 - ITAT BANGALORE] Following the aforesaid orders (supra), we set aside the orders of the AO and restore the matter of treatment of profit declared on sale of shares, claimed as exempt u/s 10(38) of the Act, to the file of the AO to re-adjudicate the issue afresh; after making available to the assessee for rebuttal all documents; including Statements, Investigation Reports, etc., relied upon by Revenue for making the additions/disallowances and providing adequate opportunity to the assessee for cross examination of persons whose statements are being relied upon. - Decided in favour of assessee for statistical purposes.

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• 2018 (12) TMI 520
  Cash credits u/s 68 - bogus long term capital gain - exemption u/s 10(38) - Held that:- Taking into consideration the facts and circumstances of the case and the judicial decisions cited, as find that the issue for consideration is squarely covered by the orders of the Bengaluru ITAT in the cases of Arvind Kumar Moolchand [2017 (5) TMI 1643 - ITAT BANGALORE] and Pukhraj Hasmuchlal [2018 (1) TMI 1406 - ITAT BANGALORE] - set aside the orders of the AO and restore the matter of treatment of sale proceeds declared on sale of shares as unexplained credits u/s 68 of the Act to the file of the AO to re-adjudicate the issue afresh; after making available to the assessee for her rebuttal all documents relied upon by Revenue for making the additions/disallowance and providing adequate opportunity to the assessee for cross-examination of persons whose statements are being relied upon. Assessee’s appeal allowed for statistical purposes.

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• 2018 (12) TMI 519
  Unexplained cash credits u/s 68 - bogus long term capital gain - exempt u/s 10(38) denied - Held that:- Taking into consideration the facts and circumstances of the case and the circumstances that the assessee specifically requested for cross-examination of the deponents whose statements were the basis of addition by the AO and also the report of the Investigation Directorate, Kolkata for rebuttal; from the judicial decisions cited, we find that the issue for consideration is squarely covered by the orders of the Bengaluru ITAT in the cases of Arvind Kumar Moolchand [2017 (5) TMI 1643 - ITAT BANGALORE] and Pukhraj Hasmuchlal [2018 (1) TMI 1406 - ITAT BANGALORE] Following the aforesaid orders (supra), we set aside the orders of the AO and restore the matter of treatment of profit declared on sale of shares, claimed as exempt u/s 10(38) of the Act, to the file of the AO to re-adjudicate the issue afresh; after making available to the assessee for rebuttal all documents; including Statements, Investigation Reports, etc., relied upon by Revenue for making the additions/disallowances and providing adequate opportunity to the assessee for cross-examination of persons whose statements are being relied upon. It is accordingly ordered. Consequently, ground No. 2 is disposed off as above.

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• 2018 (12) TMI 518
  Transfer pricing adjustment - addition towards Account of Management charges - Held that:- Following the order of the Hon’ble High Court in AYs 2005- 06 and 2006-07 and taking note of the Hon’ble jurisdictional High Court decision in assessee’s own case [2016 (2) TMI 406 - CALCUTTA HIGH COURT] the submission of the appellant that the adjustment of TPO towards Account of Management charges is arbitrary has been dealt by the First as well as the Second Appellate Authority and a concurrent finding of fact has been recorded that the TPO in principle accepted the remuneration model of 25% revenue sharing and the same has been substantiated and justified by the documents so submitted before the authorities below. Further, the genuineness of the documents which were relied on by the authorities have not been doubted by the Department. Thus, in view of the above, we do not find any illegality and infirmity in the orders and further we are of the opinion that a concurrent finding of fact on the basis of the documents on records was recorded by the First Appellate Authority as well as the Second Appellate Authority. Accordingly, no question of law arises out of the judgment rendered by the authorities below. Disallowance of software expenses - non business expenses - Held that:- Respectfully following the order of the Tribunal in AY 2005-06 [2015 (1) TMI 870 - ITAT KOLKATA] as well as taking note of the Hon’ble jurisdictional High Court decision in Indian Aluminium Co. ltd. Vs. CIT [2016 (3) TMI 691 - CALCUTTA HIGH COURT] wherein has held that software development expenditure which was application software was revenue in nature, and also the fact that the revenue has accepted the view of the Ld. CIT(A)/Tribunal on this issue, we confirm the action of the Ld. CIT(A) and dismiss this ground of appeal of revenue.

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• 2018 (12) TMI 517
  Allowance of remaining portion of 50% of additional depreciation u/s 32(i)(iia) of the Act on assets put to use for a period of less than 180 days - Held that:- This issue is already settled in favour of assessee in its own case for assessment year 2010-11 [2018 (8) TMI 1639 - ITAT KOLKATA] as held he manner in which the Revenue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more - upon a plain reading of the unamended provision, it could not be said that the Assessee could not claim balance depreciation in the A. Y. , which follows the A. Y. , in which, the machinery had been bought and used, albeit, for less than 180 days. - decided in favour of assessee Disallowance of lease rental expenditure - Held that:- Similar claim of deduction was indeed allowed by the assessee in all the scrutiny assessments up to assessment year 2008-09. Hence, there is no reason for the revenue to take a divergent stand during the year under appeal. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of Radhaswami Satsang [1991 (11) TMI 2 - SUPREME COURT]. In view of the aforesaid findings in the facts and circumstances of the case, we find no infirmity in the order of the Ld. CIT(A) deleting the disallowance Addition u/s 14A - Held that:- Referring to case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]we hold that no disallowance under second limb of Rule 8D(2) could be made in the facts and circumstances of the case. With regard to third limb of Rule 8D(2), we hold that only investments that had yielded dividend income are to be considered for the purpose of computing the disallowance under third limb of Rule 8D(2), which would be in consonance with the decision of this Tribunal in REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA]. Accordingly, ground no. 1 raised by the assessee in cross objection is partly allowed. Set off of long term capital loss of assessment year 2010-11 against the long term capital gain of the year under appeal - Held that:- It has already been held by the Hon’ble Supreme Court in the case of CIT vs. Manmohan Das (Deceased) (1965 (11) TMI 33 - SUPREME COURT) that the eligibility of loss brought forward from earlier year for set off is to be examined by the AO only in the year in which such loss is sought to be set off against any income.Eligibility to claim set off of long term capital loss pertaining to assessment year 2010-11 of Rs. 8,75,732/- should be looked upon by the ld. AO only in the year in which decision sought to be set off against the income. Accordingly, ground no. 3 raised by the assessee in cross objection is allowed.

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• 2018 (12) TMI 516
  Capital gain - Deemed sale consideration u/s 50C as against sale consideration as per the registered sale deed - Held that:- The contention of the assessee is that the higher stamp value has not been finalized basis the notice issued under section 54 of the stamp Act and it could be subject matter of appeal and till such time, such higher value has not been finalized, the same cannot be accepted for section 50C purposes. The copy of conveyance deed, the order of the sub-registrar, the notice under section 54 of the stamp Act and the status of any appeal being preferred against the said order are not brought on record by either of the parties. In absence of adequate material on record, we are therefore unable to take a view in the matter. The matter is accordingly set-aside to the file of the AO to examine the same a fresh after seeking requisite information from the Sub-Registrar authority regarding the final value so determined in respect of impunged property and decide as per law taking into consideration the above discussions. In the result, the ground is allowed for statistical purposes. Cost of acquisition of the land taken by the AO as against cost of acquisition taken by the appellant in the return of income while working out long term capital gains on sale of property as jointly owned by the assessee along with his brother - Held that:- The valuer was issued notice u/s 133(6) and in response, he submitted that no document/purchase deed was provided by the assessee regarding valuation of land and he has taken the land rate basis the commercial land rates of various areas in Jaipur city for the location Ramgang Bazar to Galta Gate. Further, what those land rates are, there is no data which has been shown as forming part of the valuation report. We therefore find serious deficiency in the approach of the valuer. Firstly, where he has himself described the property as residential located in a residential area and occupied by the assessee for own residence and not rented out, a fact not been disputed even before us, that on basis, he has considered the commercial land rate. Secondly, what stopped the assessee who has appointed the valuer in sharing a copy of the registered purchase deed with the valuer. This shows the conduct of the assessee and his intention of seeking a valuation report which supports his case of a higher value instead of determining a fair market value which is the mandate of law. Therefore, we are of the considered view that the lower authorities have rightly rejected the valuation report and do not agree with the contention of the ld AR that the AO could not have rejected the valuation report and ought to have accepted the same. The approach of the AO has however been found acceptable to us. To our mind, he has taken a sound basis of taking the value as per actual purchase deed dated 17.04.1980 and taking an average appreciation in the value of property @ 10% p.a., determined the fair market value at Rs. 38,500. Addition under the head “salary” - income was taken at Rs. 1,80,000/- as against income of Rs. 1,44,000/- as declared by the assessee - Held that:- The salary for the impugned year is Rs. 144,000 and salary for the next year is Rs. 180,000 and by mistake, salary certificate for the next year has been submitted during the assessment proceedings, however a correct certificate has been submitted during the appellate proceedings. AO is directed to verify the salary certificates with the return of income and where the same is found in order, allow the necessary relief to the assessee. In the result, the ground of appeal is allowed with above directions - Appeal of the assessee is partly allowed for statistical purposes.

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• 2018 (12) TMI 515
  Claim towards exchange fluctuation loss - whether loss claimed by the assessee on account of foreign exchange fluctuation is allowable under Section 37(1)? - Additional depreciation - Held that:- As carefully gone through the judgment of Apex Court in Tata Iron And Steel Co. Ltd.[1997 (12) TMI 5 - SUPREME COURT] the manner or mode of repayment of the loan has nothing to do with the cost of asset acquired by the assessee for the purpose of business. The Apex Court has also found that even if the borrowed funds were not repaid, it will not alter the cost of the asset. The Apex Court further found that the cost of raising money for purchase of the asset and the cost of the asset are two different and independent transactions. Therefore, for the purpose of depreciation, the cost of asset cannot be reduced or increased due to exchange rate fluctuation. As referring to Section 43A of the Act which provides for capitalization of such losses arising out of fluctuation in foreign currency on acquisition of capital asset outside India COOPER CORPORATION (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2016 (5) TMI 809 - ITAT PUNE] found that it may not be applicable for acquisition of asset in India. Referring to Accounting Standard – 11, the Pune Bench found that the loss or gain arising from conversion of liability at the closing rate should be recognized in the Profit & Loss account for the reporting period. As relying on COOPER CORPORATION (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2016 (5) TMI 809 - ITAT PUNE] Assessing Officer is directed to allow the loss suffered in exchange rate fluctuation on foreign currency loan as revenue expenditure. - Decided in favour of assessee

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• 2018 (12) TMI 514
  Addition u/s 14A - no exempt income earned by the assessee - Held that:- The assessee made the investment out of interest free surplus fund available to the assessee and the assessee did not earn the income which is exempt u/s 14A of the Act. The above facts were not disputed by the lower authorities. AO made the addition placing reliance on the Circular No.5/2014 of the CBDT and the Ld.CIT(A) confirmed the addition. Hon’ble High Court of Delhi in the case of Pr.Commissioner of Income Tax Vs. IL &FS Energy Development Company Ltd. [2017 (8) TMI 732 - DELHI HIGH COURT] considered the Board Circular and held that the Circular cannot override the express provisions of section 14A r.w.Rule 8D of I.T.Rules. After considering various decisions, Hon’ble High Court of Delhi held that no disallowance u/s 14A of the Act was called for in case of no exempt income earned by the assessee, in the relevant assessment year. - Decided in favour of assessee.

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• 2018 (12) TMI 513
  Reopening of assessment u/s 148 - reopening on the basis of audit party - question of law raised by audit party - Held that:- The issue of law pointed out by the Audit objection was relatable to the set off of unabsorbed depreciation relating to the Assessment Year 1998-99, the set off of which to the extent of Rs. 3,38,521/- stands allowed against the income of year in the question and set off of Rs. 12,10,970/- was allowed in the preceding Assessment Year and the balance in subsequent Assessment Year. According to the audit party the unabsorbed depreciation for Assessment Year 1998-99 was eligible for set off of within a period of 8 years vide amendment made in law. In support of this fact assessee submitted before the CIT(A) the text of the audit objection. Notice u/s 147/148 in the assessee’s case was issued on the basis of point of law raised. This by itself exposes the invalidity of the action of issuance of notice u/s 148 of the Act. It is well established principle of law that resort to proceedings u/s 147 r.w.s 148 cannot be had to on a question of law raised by audit party. This law has been laid down in the case of CIT vs. Lucas TVS Ltd. [2000 (12) TMI 102 - SUPREME COURT], wherein held an audit opinion in regard to the application or interpretation of law cannot be treated as information for reopening the assessment under s. 147(b) In view of the above position in law proceedings set in motion with the issuance of notice u/s 148 r.w.s. 147 on the basis of audit query are not sustainable under law in the facts and circumstances of the case and as such the impugned assessment order is not maintainable and sustainable under law hence on this ground alone the assessment order deserves to be vacated.- decided in favour of assessee.

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• Customs

• 2018 (12) TMI 510
  Suspension of CHA License - Regulation 16 of the Customs Brokers Licensing Regulations 2018 - principles of natural justice - Held that:- Indeed, the Ext.P4 order of suspension was passed on 26.11.2018. It is an interim measure, and no doubt the Commissioner of Customs has the power to do so. That said, I may also add that suspending a trade license-rhetorically put, an economic death sentence-visits upon the licensee with severe financial consequences. So it offends the notions of justice and constitutional morality if the authorities take too technical a view of the provisions dealing with suspension of license. To meet the ends of justice, as mandated under the Regulation 16, the Customs Department will immediately inform MBK Logistics, through a detailed notice, about the grounds of suspension, and hear its representative - petition disposed off by way of remand.

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• 2018 (12) TMI 509
  Principles of natural justice - cross examination of the chemical examiner as well as chartered engineer not granted - violation of Section 138 (b) of the Customs Act, 1962 - Held that:- Considering the fact that the provisions of Section 138 (b) of the Customs Act, 1962 are pari materia to the provisions of Section 9D of the Central Excise Act, 1944 - in the case of Alliance Alloys Pvt Ltd vs. CCE, Delhi [2016 (7) TMI 153 - CESTAT CHANDIGARH], this Tribunal has examined the issue whether in terms of Section 9D of the Central Excise Act, 1944, the adjudicating authority is required to first examine the witness in chief for cross examination or not and the matter was remanded for re-examination of the case as adjudicating authority has not given an opportunity of cross examination of witness. The adjudicating authority has not followed the procedure laid down under Section 138 (b) of the Customs Ac, 1962 - matter remanded back to the adjudicating authority to re-adjudicate the matter in terms of the observatiaons of this Tribunal in the case of Alliance Alloys Pvt. Ltd. - appeal allowed by way of remand.

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• 2018 (12) TMI 508
  Rectification of mistake - typographical error - Held that:- There is an error in the order accordingly, in para 1 and preamble of the order against appeal No. C/11801/2017, the OIA No. “KDL-CUSTM-000-APP-032-17-18 dated 08.08.2017” is substituted - address is also corrected - The Registry is directed to make necessary correction in the dispatch letter of the order - ROM Application allowed.

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• Corporate Laws

• 2018 (12) TMI 511
  Oppression of mismanagement - rightful holder of shares - divorce between husband and wife - 200 shares of 1st respondent were transferred from the name of the appellant, on the basis of transfer document executed by the appellant and on the basis of family settlement dated 29th June, 2000 - as alleged family members of the appellant’s in laws have not only transferred her 200 shares from the name of the appellant in the name of 3rd respondent but dishonestly and fraudulently transferred a substantial part of land owned by 1st respondent to defeat the claim of appellant over the said property being the holder of 20% shares Held that:- Shares have been transferred without valid instrument and no attempt has been made to get the transfer deed signed from the appellant. It also shows that due diligence has not been done. To participate/attend the meeting of a company is the prerogative of the shareholder. However, the company (here 1st respondent) is duty bound to send notice of every meeting to the shareholder, therefore, the appellant had a right to receive notice of each and every meeting while she was reflected as shareholder in the company records. Admittedly at last till 2013 even as per Respondents, Appellant was shareholder till 2013, but even till then No notice sent is shown. As established that the shares in the name of appellant have been transferred in the name of 3rd respondent, therefore, the impugned order dated 14.11.2017 passed by the NCLT, Ahmedabad is set aside and the appellant is found to be rightful holder of 200 shares and the shares transferred in the name of 3rd respondent are held illegal. Further we direct the 1st respondent to rectify the register so as to restore the appellant as holder of 200 shares in the 1st respondent company. We set aside the impugned order dated 14.11.2017 of the Tribunal and hold that the appellant is rightful holder of 200 shares. As we hold that the appellant is holder of 200 shares (20% of the capital at that time), it is in the fitness of things that the Tribunal decides the other issues raised for which in Impugned Order Points 6 to 8 were framed, on merits. Therefore, the matter is remanded back to the NCLT to decide the other issues raised by the appellant in Company Petition. The parties are directed to appear before the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad on 1st November, 2018.

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• Service Tax

• 2018 (12) TMI 507
  Works contract service - valuation - inclusion of material supplied free of cost by the service provider in assessable value - Held that:- There are no merits in the appeal - the appeal is dismissed.

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• 2018 (12) TMI 506
  Management or Business Consultant Service - Non-payment of service tax - assistance in implementing Clean Development Mechanism (CDM) - sale and management of certified emission reduction certificates (CERs) - recovery of Service tax on reverse charge basis - Circular of the Board dated 27.06.2011. Held that:- The definition under Section 65(65) of the Act, 2007 is in the widest possible term. The Agreement thereafter will have to be read and interpreted from what had been agreed between the parties which in our opinion is unambiguous. Obligations were created in terms of the Agreement which have been reproduced in earlier part of the order where the UK Company was also obligated to provide services in marketing the CERs to beget favourable terms for the petitioner- Company. Keeping in mind that such concepts and obligations which have been created in terms of the Kyoto Protocol and the Agreement arising out of climate change, there has been some debate on such issue and no final opinion was available during the period such demand had been made, therefore, the Court could be inclined to hold that there may not be any occasion to impose penalty under Sections 76, 77 and 78 of the Act, 2007/ The appeal is otherwise dismissed except to the extent in relation to the imposition of penalty as made by the Assessing Authority.

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• 2018 (12) TMI 505
  Voluntary Compliance Entitlement Scheme - Department observed that the tax dues declared by the appellant were for the subsequent period on the same issue for which a show Cause Notice dated 04.01.2011 for the period w.e.f. 01.01.2009 to 31.03.2010 had already been issued - Held that:- The demand in the impugned Show Cause Notice and the period in dispute is same. It becomes clear that the appellant has not disputed their liability of service tax amounting to Rs. 4,50,756/-, as demanded vide the present Show Cause Notice. No doubt the present Show Cause Notice was issued during the pendency of adjudication of the prior Show Cause Notice of 25.02.2014. But apparently it was issued after the proposal of rejection was confirmed vide original adjudicating authority’s order dated 18.05.2015. With the said rejection, the immunity from interest and penalty as was available to the appellant under VCES Scheme was no more available to them. Irrespective of the said rejection, the fact remains is that the service tax of Rs. 4,50,756/- stands deposited with the Department since 30.12.2013. Hence, the issuance of impugned Show Cause Notice is apparently qua the demand which stands already deposited. Penalty - Held that:- It is an apparently admitted fact that the Department has knowledge of non payment of the impugned demand since the year 2011. It is also being conceded by the Department that a confusion was prevalent during the impugned period qua the liability with respect to renting of immovable property services - penalty not warranted and is set aside. Order under challenge is sustainable only qua confirming the demand of interest on the amount of service tax of Rs. 4,50,756/-. Rest of the Order is set aside - appeal allowed in part.

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• 2018 (12) TMI 504
  Principles of Natural Justice - demand of Service Tax on various income - Income from Public Issue - Interest of RBI Relief Bonds - Interest received from others - Income from Mutual Funds - Income from Distributor and others - Held that:- The lower authority have not specifically discussed each heads of income arises and how the said income becomes taxable as a service. The impugned orders are therefore, set aside and matter remanded to the original adjudicating authority to clearly give finding in respect of each head of demand confirmed by Commissioner (Appeals) - appeal allowed by way of remand.

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• 2018 (12) TMI 503
  Penalty u/s 78 - Man Power Supply Service - service tax with interest paid on being pointed out - no suppression of facts - Held that:- The appellant have recorded all the transactions in their books of account. As per their letter dated 18.12.2012, they have explained that since they were providing the service to SEZ which was subsequently converted into DTA but they were not aware of the suit of the service recipient from SEZ Unit, they were under bonafide belief that service provided from SEZ unit is not chargeable to Service Tax. Therefore the payment of Service Tax was escaped under bonafide belief without any malafide intention. The appellant did not have any malafide intention, more over the appellant immediately after pointing out by the Audit paid the Service Tax along with interest and intimated to the department - the case should have been concluded in as per the provision of Section 73(3) finance Act, 1994. According to which the department was not supposed to issue any show cause notice to the appellant. Penalty set aside - appeal allowed.

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• 2018 (12) TMI 502
  Rectification of Mistake - includibility of value of material in aseessable value - Held that:- The invoices for supply of material for the purpose of carrying out the service of Erection, Commissioning and Installation, is in the name of service recipient. Therefore, the material portion is not part and parcel of gross value of the service provided by the appellant. Therefore, the value of material which was purchased in the name of service recipient, cannot be added in the gross value of the service provided by the appellant. The value of material which was purchased in the name of service recipient, cannot be added in the gross value of the service provided by the appellant. Accordingly, the demand attributable to the material value raised by the lower authorities would not sustain and the same is set-aside - ROM Application allowed.

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• 2018 (12) TMI 501
  Classification of Service - Intellectual Property Service or not - appellant had received technical designs and drawings of locks from two foreign companies - Held that:- Only in a case where property rights is temporarily transferred on even for use on a temporary basis, can only be classified under the Intellectual Property Rights Services in the Finance Act, 1994 - In the present case, there is a claim of the appellant that there is transaction of outright sale of drawing. In support, he submitted certificate from the foreign supplier. However, the said certificates were not produced before the lower authorities. Therefore, the matter needs to be reconsidered for the period prior to 18.04.2006 - matter on remand. Demand pertaining to period from 16/03/2005 to 18/04/2006 - Held that:- It is settled that service tax on reverse charge mechanism can be levied only with effect from 18/04/2006 when section 66A was enacted - Therefore, the demand for the period 16/03/2005 to 18/04/2006 is set aside. Appeal allowed by way of remand.

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• 2018 (12) TMI 500
  Maintainability of appeal - Jurisdiction - case of appellant is that the appeal is not maintainable before this Tribunal that the right forum is the revisionary authority - Held that:- As per the cleared provision under Section 86 and first proviso to Section 35B(i) of the Finance Act, 1994, the revision application is maintainable before the revisionary authority - the appeal is not maintainable before this Tribunal - appeal dismissed being not maintainable.

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• 2018 (12) TMI 499
  Restoration of appeal - appeal was dismissed for non-compliance with pre-deposit - case odd appellant was that the pre-deposit was made though belatedly - Held that:- The appellant failed to comply the earlier order of this Tribunal and they also failed to comply with the Commissioner (Appeals) order, whereby pre-deposit was ordered. Considering all these facts, the Tribunal have already passed detailed and reasoned order on dismissal of the application for restoration of appeal vide order dated 28.01.2016. Thereafter, there is no change in circumstances, therefore, the present ROA is not maintainable. Since the order dated 28.01.2016 has attained finality, the same cannot be disturbed - Restoration of appeal application dismissed.

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• Central Excise

• 2018 (12) TMI 498
  Interest on delayed refund - Refund of duty paid in excess - calculation of relevant date - the amount of said refund which got initially adjusted against the outstanding liability of the appellant, if subsequently that liability is set aside, the said period of 3 months has to be counted whether from the date of the initial sanctioning order or from the date of doing away the liability qua which the said amount was adjusted? Held that:- The period of 3 months under Section 11BB has to reckon from the decision of Tribunal doing way the liability against which part of sanctioned refund was adjusted. Admittedly, the said adjusted amount of Rs. 1,66,322/- has been refunded within 3 months of the said order. Question of levy of any interest does not at all arise. Otherwise also the said amount was adjusted against the liability of paying interest. Seen from this angle also there arises no question of levy of interest on interest. The Larger Bench of this Tribunal in the case of Indian Thermoplastics Pvt. Ltd. V/s. Commission of Customs, Kolkata [2003 (12) TMI 84 - CESTAT, NEW DELHI] has held that the applicant is entitled to interest from the date of final order passed by the Tribunal and if the amount is refunded within 3 months of the order of Tribunal, the same will be in consonance with the principle as contained under Section 11BB of CEA, 1944. The Adjudicating Authorities below have committed no error while declining the entitlement of the appellant for interest on the amount sanctioned in its favour - appeal dismissed - decide against appellant

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• 2018 (12) TMI 497
  CENVAT Credit - input/input services used in dutiable and exempted excisable goods - non-maintenance of separate records - Rule 6 (3A) of CCR, 2004 - Held that:- The appellants have exercised the option of applicability of Rule 6 (3A) of CCR, 2004 and due intimation of the same was given to the Department vide a letter dated 01.04.2014. This option was exercised because the appellant admittedly was not maintaining a separate accounts for the receipt, consumption and inventory of inputs used - it is apparent that sub-clause (a) of sub-rule (3A) has been complied with by the appellant and that the appellant had been making the payment in accordance of sub-rule 3A (b) (iii). CENVAT Credit - sale of electricity generated by the appellant to the other customers against monetary consideration - demand of reversal of credit on the ground that electricity is an exempted commodity - Held that:- That is the electricity is held to be an excisable goods. Once it is held as excisable, denial of cenvat credit there upon is contradictory to the legislative intent. The findings are therefore, liable to be set aside - credit allowed. CENVAT Credit - quantity of input as is used in or in relation to the manufacture of exempted goods - waste/by-product - Held that:- Iron fills as are emerging as a by-product but an inevitable waste due to being segregated during the manufacture of the final product, the appellant is not liable to be vested with any liability on account of Rules 6 (3) (b) of CCR, 2004 - demand set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 496
  Classification of goods - Import of Siapton 10L in 200Ltr drums and the same is repacked and sold - appellant sought classification of the product under Chapter heading 31 where repacking, labeling does not amount to manufacture, while the Revenue has sought to classify the product under Chapter heading 38 where repacking, labeling etc. amounts to manufacture - whether impugned goods merit classification under Chapter heading 31 or under Chapter heading 38 - Difference of opinion. Held that:- As there is difference of opinion, the issue needs to be referred to a Larger Bench for determination of following question:- Is it necessary for a plant growth promoter to be able to simultaneously inhibit growth or otherwise modify (apart from promotion) plant processes, to qualify as plant growth regulator under heading 3808 of Central Excise Tariff Act, 1985? The registry may place the file before the Hon ble President to constitute a larger bench to resolve this issue.

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• 2018 (12) TMI 495
  Rectification of mistake - a case was booked against the appellant for clearances of branded vegetable oil in the garb of unbranded vegetable oil - Held that:- It is apparent that Tribunal has considered all the evidences for arriving at the conclusion and rejected the ones which were not found well supported, as evidenced from Para 6.8 of the order. In these circumstances, it cannot be said that Tribunal has not examined all the evidences. Any re-appreciation of the said evidences which has already been rejected by Tribunal now would amount to review of the order. ROM Application dismissed.

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• 2018 (12) TMI 494
  SSI Exemption - use of Brand Name of other person - the appellant has used the brand name which is also used by the family members of the appellant - Held that:- The same brand name is used by authorized family members for conducting their respective business. Identical set of facts is decided in the case of Laxmi Industries vs. CCE, Rajkot [2013 (11) TMI 1418 - CESTAT AHMEDABAD], where it was held that SSI exemption is eligible to the firm wherein the partners are belonging to a same family. The appellant is using brand name which is also used by other family members cannot be said that the appellant is using the brand name of other persons - benefit of SSI Exemption is to be allowed - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 493
  Method of Valuation - classification of goods - fragrances (Perfumery compound) - products mainly supplied to industrial consumers - appellant are classifying their goods under CETH 3302 9011 and clearing the same to industrial customers as well as to the traders by adopting the value under Section 4 of Central Excise Act, 1944 - case of the department is that the goods is classifiable under CETH 3303 0040 which is notified to be assessed under Section 4A of Central Excise Act, 1944. Held that:- In the present case, there are ample of evidence such as nature of product, product does not contain alcohol, product label clearly indicate that it is meant only for industrial use, the package of product is such that the same is not for individual human consumption, therefore, without any evidence contrary to these evidences, the department failed to challenge the classification of the product supplied by the appellant. The product perfumery compound manufactured by the appellant is correctly classifiable under 3302 and not under 3303 as claimed by the Revenue - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 492
  Utilization of Cenvat Credit of basic excise duty for payment of Education Cess and Secondary & Higher Education Cess - Held that:- This issue has been time and again considered by this Tribunal, various High Courts and Supreme Courts and held that Cenvat Credit can be utilized for payment of Education Cess and Secondary & Higher Education Cess for the reason that there is no bar in Rule 3 of Cenvat Credit Rules, 2004 for such utilization. The Education Cess and Secondary and Higher Education Cess were nothing but duty of excise. The terms Cenvat Credit provided under Rule 3 is includes the amongst others, basic excise duty. In terms of the said Rule the said Cenvat Credit can be utilized for payment of any duty of excise - appellant is clearly entitled for utilization of Cenvat Credit of basic excise duty for payment of Education Cess / Secondary and Higher Education Cess - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 491
  Process amounting to manufacture or not - process of tinting i.e. mixing the base paint with the colourants to obtain the paint of desired shade - Held that:- The issue has been decided in appellant own case M/S BERGER PAINTS INDIA LTD, PS CHOUDHARY VERSUS C.C.E. AHMEDABAD-I [2018 (6) TMI 1144 - CESTAT AHMEDABAD], where it was held that The appellant at the depot are carrying out the activities of tinting, i.e., mixing of base paints with colourants. Therefore, the said product is packed and sold to the dealer. The said activity is amount the manufacture by the fiction of the law as per section 2(f) (iii) of Central Excise Act, 1944. CENVAT Credit - Held that:- The appellant is at liberty to submit the input credit documents to the Adjudicating Authority. If the appellant is able to establish with the documents as input invoices, receipt of goods, use of inputs etc. then the appellant will be eligible for Cenvat credit - matter on remand. Penalty on the employee of the Company - Held that:- Penalty not imposable and is set aside. Appeal allowed in part and part matter on remand.

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• 2018 (12) TMI 490
  CENVAT Credit - defective goods returned by the customer in terms of Rule 16 of Central Excise Rules, 2002 - sole allegation of Revenue is that the appellant have taken Suo moto credit instated of filling refund claim - Held that:- There was serious error on the part of the audit officer for insisting to reverse the credit on the returned goods. The appellant after reversal of the credit, requested the Deputy Commissioner to allow the re-credit of the same as there was no reason for denial of the credit. The Deputy Commissioner has not acted on the the request, therefore, the appellant have taken suo moto credit - it is clear case of harassment to the assessee by the departmental officer. Suo moto re-credit - Held that:- The appellant was legally entitled for the Cenvat credit under Rule 16 for which no permission is required, even the suo moto re-credit is also is with reference to Rule 16 and since under Rule 16 on permission was required there was no need for waiting of formal permission from the department - so long the department has no objection on merit on the admissibility of the Cenvat Credit under Rule 16, the appellant has rightly taken the credit. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 489
  Clandestine removal - shortage of finished goods and raw material - shortage mainly due to normal loss like evaporation - Held that:- There is no evidence brought on record that on account of such shortage, the goods have been cleared clandestinely - The manager of appellant company, Shri. Anand Kumar Singh, also clearly stated that the shortage is not due to clandestine removal in his statement. He explained that due to nature of product there is a spillage and evaporaion at different stage of manufacturing. Therefore, this shortage is for a long period of production, the explanation given by the manager in his statement appears to be convincing. Since, there is no evidence of clandestine removal, a demand is not sustainable - demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 488
  Refund of accumulated credit - inputs used in the exempted export goods - case of the department is that the goods exported by the respondent are exempted from Central Excise duty and appellant is not entitled to CENVAT Credit and refund is denied - Held that:- There is no dispute that the Revenue accepting proposal of the respondent to export the goods under Bond and the LUT allowed the export. Therefore, the export of goods under bond/ LUT is not under dispute. As per Rule 6 (6) (v) it is provided that if the goods are exported under Bond/LUT Rule 6 (1), (2) and (3) are not applicable and the fact of the same is that though the goods manufactured and exported by the respondent is exempted but they are entitled for the Cenvat Credit in respect of inputs. It is also observed that as per notification 42/2001-CE (N.T.) dated 26/06/2001, manufacturer, exporter is required to export all excisable goods under Bond/ LUT. Therefore, even though the finished goods are exempted, the same is allowed to be exported under Bond/ LUT. Therefore, the availment of Cenvat Credit by the respondent is not objectionable - refund is allowed. Monetary amount involved in the appeal - Held that:- Except the one appeal no. E/11633/2018 which involve refund amount of Rs. 20,22,895/- in all other appeals, the amount involved is less than 20 lakhs, therefore, all those appeals are not maintainable also in view of Government’s litigation policy issued vide circular no. F.No. 390/Misc/116/2012 dated 11/07/2018. Appeal allowed in part.

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• 2018 (12) TMI 487
  Clearance of Cement to various industrial organizations/ industrial consumer - concessional rate of duty denied - N/N. 4/2006 dated 01.03.2006 - Held that:- Identical issue adjudication has come up before the Tribunal in the case of Diamond Cement vs Commr. of Central Excise [2017 (1) TMI 1476 - CESTAT NEW DELHI], where it was held that the sale to the individual without any intermediary person is entitled for concessional rate of duty - benefit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 478
  Classification of goods - rice bucket elevator - rice conveyor - the appellants were classifying these goods under heading No. 8437 as “machinery used in Milling Industry” where the tariff rate is nil - according to the department these goods are classifiable under heading No. 8428, as “other lifting, handling, loading or unloading machinery - whether the impugned goods are classifiable under CETH 8428 or under CETH 8437 of CETA? Held that:- The conveyors and elevators manufactured by the appellants are designed, specifically, for rice mills which has not been disputed by the adjudicating authority in the impugned order, wherein it has been observed by the adjudicating authority that “the goods in question are basically conveyors & elevators, which are used for the transportation of the rice in a rice mill from one stage to the another. They can be horizontal as well as vertical as per the requirement of the Industry”. These conveyors and elevators manufactured by the appellants specifically designed for use in rice mills are supplied alongwith the other rice mill machinery to the rice millers. These facts are not in dispute, therefore, the combination of machines and the conveyors and elevators supplied by the appellants alongwith other rice milling machinery to the rice millers is a combination of machine which ultimately perform the function of rice milling - Thus, as per Section notes the entire machinery is classifiable under heading 8437 which is for machinery used in milling industry and it is not disputed that these elevators and conveyors being manufactured by the appellants were not used for milling industry. The appellants have produced various technical opinions as well as the data from Customs and Central Excise Department wherein the importer as well as exporter of elevators and conveyors used specifically designed for rice milling have been classified under heading No. 8437 of the CETA. Revenue heavily relied on the decision of Eminence Equipments Pvt. Ltd. [2015 (7) TMI 545 - CESTAT MUMBAI] to say that conveyors and elevators used for rice mills is to be classified under chapter heading No. 8428 - We have gone through the facts in the case of Eminence Equipments Pvt. Ltd. (supra) was not manufacturing the elevators and conveyors only for rice millers but were supplying the same to other industries like breweries etc., therefore, the items manufactured by Eminence Equipments Pvt. Ltd were of general nature and not for specific use to the machines of milling industry. Further, the conveyors and elevators manufactured by M/s Eminence Equipments Pvt. Ltd. did not come under the category of composite machines as they were supplying only elevators and conveyors and not combination of machines - Therefore, the facts of the present appellants are distinguishable from the facts of the case of M/s Eminence Equipments Pvt. Ltd. The conveyors and elevators specifically manufactured as the part of rice milling machinery alongwith other machinery of rice by the appellants merit classification under chapter heading No. 8437 of CETA, 1985 - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (12) TMI 486
  Service of notice - the Intelligence Officer set the petitioner ex-parte and issued the Ext.P5 penalty proceedings - principles of natural justice. Whether the petitioner has been served a statutory notice or in the alternative, whether there is any deemed service of notice on the petitioner? Held that:- Given the penal consequence that flow from Ext.P6, I reckon the authorities could have taken a little more effort to ensure service of notice, for it has at its disposal the petitioner's alternative address, too. Indeed, the Government Pleader with access to the records could inform the Court that the petitioner perhaps has taken undue advantage of the system - also, nothing prevented the assessing authority to record that reason in Ext.P6 and then reckon it as a deemed service. Further, at variance from Ext.P6, the Department cannot supply fresh reasons at this stage. Impugned order set aside - matter remanded to the third respondent.

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• 2018 (12) TMI 485
  Levy of Tax - chemicals used as consumables in the process of job work of dyeing of fabric - property in the goods has passed on to the principals - Held that:- The matter is no longer res integra. This Court in a recent judgment in M/s AP Processors, Plot No.103, Sector 24, Faridabad through its partner Shri Arvind Jain vs. State of Haryana through Principal Secretary to Government of Haryana, Excise and Taxation Department, Civil Secretariat, Haryana, Chandigarh [2018 (5) TMI 1797 - PUNJAB AND HARYANA HIGH COURT] has already settled the legal issue against the respondent-revenue. Therein, after considering the relevant statutory provisions and the entire case law on the point, it has been concluded that the chemicals used in the job work are taxable but the pertinent question to be answered would be as to how much of dyes/colours are taxable which is transferred to the fabric when the whole quantity of consumable is not transferred. The tax on the entire value of chemicals consumed during the process of dyeing and job work are not to be included for the purpose of levy of VAT as substantial portion of the same is not transferred to the principal eventually. The matter is remanded to the Assessing Officer to decide the matter afresh.

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• 2018 (12) TMI 484
  Compounding Scheme - main contention raised in the first appeal was that the total tax as per the return or accounts of a particular year has to be taken without any segregation of the Head Office and branches - Circular No. 42/2006 - Whether the Tribunal was correct in having found that computation of compounded tax, on the basis of the highest tax conceded in the returns or accounts in the three consecutive preceding years, should be on a consolidated basis without segregation of the Head Office and branches? - Held that:- Section 8(f)(i) speaks of the highest tax payable by the assessee in the earlier three years either under the KGST Act or KVAT Act to be taken as the basis for determining the compounded tax payable. Explanation II, however, makes it very clear that a branch has to be treated as an independent place of business for the purpose of computing the tax payable as compounded tax. Sub-clause (iii) is with respect to a branch opened in the subject year, wherein there is prescribed an average of the tax paid or payable by the dealer, in respect of the principal place of business and all branches. Hence, the intention of the legislature is clear in the said year and the tax conceded in the accounts of each of the branch and the Head Office had to be specifically taken for determining the compounded tax payable at 200% as payable for each of such distinct business place. Circular No.42/2006 also is in tandem with the provision. Based on the time in which the new branch was opened, there is a further provision made under sub-clause (iv) of Section 8(f). All these would together indicate that the specific intention of the legislature was to provide for compounded tax, taking the separate tax paid by each of the branches and computing the compounded tax for that particular branch on the basis of the highest tax conceded by it in the returns or accounts in the last three preceding years - decided against assessee. Whether the computation has to be made on the basis of the tax conceded in the returns or accounts or that determined in assessment? - Held that:- The words employed in the provision being very clear, we are in perfect agreement with the judgment of the other Division Bench in M/s.Malabar Ornaments (P) Ltd. [2011 (1) TMI 1281 - KERALA HIGH COURT], where it was held that the highest tax has to be taken as conceded in the return or accounts, which is the specific words employed in sub-clause (i) of Section 8(f) - decided in favor of assessee. Non-inclusion of purchase tax under Section 5A and additional sales tax under Section 5D - Held that:- The compounding provision having spoken of the highest tax payable, does not draw a distinction between purchase tax or additional sales tax - purchase tax is also includable for determining the highest tax payable that is conceded in the accounts or returns in the years in which the KGST Act was applicable, but not includable in the VAT period, i.e., 2005-06 - decided partly in favor of assessee and partly in favor of Revenue. Includibility of purchase tax component under Section 5D of the KGST Act - Held that:- The assessee had filed an application for compounding under the KGST Act and the same was allowed. It was subsequently in the course of the assessment year that Section 5D was brought in the statute book, increasing the tax payable under Section 5 and Section 5A by a percentage. The AOs directed the dealers who applied under the compounding provision, to pay the additional levy under Section 5D. This Court found the levy to be permissible - The dealers who were paying tax under the compounding scheme were not paying tax under Section 5 and 5A and, hence, could not be directed to pay additional tax, was the finding. If the assessees herein were regularly assessed under Section 5 & 5A and paid the additional sales tax under Section 5D for any of the years under the KGST regime, then the same would also be includable for determining the highest tax payable in the preceding three years. However, in the case of the assessees having opted for compounding the tax payable in either of the years under the KGST Act, even if there was additional sales tax levied and paid, the same would not be includable for determining the highest tax payable - decided partly in favour of the assessee and partly in favour of the Revenue. The AO is directed to re-do the assessment - revision disposed off.

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• 2018 (12) TMI 483
  Levy of tax with interest - deemed sales of dyes, chemicals, consumable, machinery parts and packing materials involved in the job works of the third parties - Held that:- Issue is decided in the case of M/S A.P. PROCESSORS [2018 (5) TMI 1797 - PUNJAB AND HARYANA HIGH COURT], where the matter is remanded to the Assessing Officer to work out the details of quantity of chemicals, dyes and colours that would get washed out in the process of dyeing and printing of fabrics undertaken by the appellant. Since the issue has been decided against the revenue, at this stage, a prayer was made by the learned counsel for the appellant- revenue that as the appellant-revenue is in the process of challenging the judgment in M/s A. P. Processors s case before the Apex Court, liberty be granted to revive the appeals in case the judgment in the said case is varied or some contrary order is passed by the Supreme Court - petition dismissed.

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• 2018 (12) TMI 482
  Levy of Turnover tax - turnover of saw mill - Section 2(xliv) of the Kerala Value Added Tax Act, 2003 - amounts shown as labour charges were deleted - Held that:- No examination of records or facts by the first appellate authority. The first appellate authority merely stated that “the further case of the appellant that he deals only with timber like pincoda etc is also found correct as per his books of accounts. Since the sawing charges collected is not related to the timber sold by the appellant, the receipt cannot be classified as one coming under section 2(xliv) and hence cannot be taxed” (sic). Obviously this finding has been rendered without looking into the records and the finding is belied by the specific invoice pointed out from the records by the learned Government Pleader - answered against the assessee and in favour of the Revenue. Inclusion of separate job works u/s 2(xliv) - contention of the assessee was that the job works did not relate to the goods manufactured and sold by the assessee - any mandate in Rule 58(1)(x) of the Kerala Value Added Tax Rules, 2005 for showing the complete name and address of the person from whom such job work was taken especially in view of Section 40A(2) specifying the requirement of complete address only in case of invoices issued in respect of a taxable sale or not. Held that:- A register was maintained, but it did not contain the entire particulars - also, the AO had issued notices to many of the persons shown in the register, which notices could not be served for reason of there being insufficient address. The assessee had also not sought for summoning any particular person as revealed from the register for the purpose of giving evidence, nor was such contention taken at any of the higher levels of appeal provided by the statute. The Assessing Officer cannot be faulted for having added back the sawing charges, in the context of no proof of job-works having been effectively adduced before him. The Assessing Officer was perfectly right in having treated the actual charges levied for sawing; an essential activity in the process of manufacture of furniture to be part of consideration of the goods sold - decided against the assessee and in favour of the Revenue. Revision dismissed.

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• 2018 (12) TMI 481
  Deletion of penalty - Jurisdiction - power of Appellate Authority to delete penalty - Estimation of taxable turnover on the basis of electricity consumed - First Appellate Authority deleted the estimation made finding that penalty has been imposed merely on technical reason of non-production of books of accounts - whether deletion of penalty on this ground is sustainable? Held that:- An Intelligence Officer invoking his power under Section 45 A of the KGST Act or Section 67 of the KVAT Act (in pari materia provisions) has been held to have no power to carry out an estimation. Estimation is a reasonable and rational reckoning of taxable turnover; which necessarily is a guess work based on various factors, aspects and activity of the concerned dealer, arriving at a probabilistic approximate determination of the taxable turnover; on the best of judgment of the taxation officer. There could be no estimation carried out in penalty proceedings and the evasion attempted has to be based on the clear materials or particulars, revealed at an inspection or offence detected otherwise. If the taxable turnover sought to be evaded cannot be clearly determined and quantified going by the provision, there can be only an imposition of penalty of Rs. 10,000/-. However, that would not preclude the Assessing Officer from proceeding for best judgment assessment based on any of these factors relevant to the activity of the dealer; on there being no production of books of accounts or even when there is production; by rejection of the same. In that event, the Assessing Officer could make an estimation which is the power and authority conferred by the statute for best judgment. On detection of an offence or any other defect on inspection or otherwise where the tax or other amounts sought to be evaded is not practicable of quantification; the Intelligence Officers should immediately transfer the files to the Assessing Officer after imposing a penalty not exceeding Rs. 10,000/-. When that is not done it is a clear reflection of the lack of team work insofar as the functioning of the Department. The questions of law framed is answered in favour of the assessees and against the revenue.

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• 2018 (12) TMI 480
  Levy of tax - sale or not - health care services provided by the petitioner to indoor patients in the hospital - Held that:- The issue is squarely covered by the judgment of Division Bench of this Court passed in M/s Fortis Health Care Limited's case [2015 (2) TMI 1014 - PUNJAB & HARYANA HIGH COURT], where it was held that The supply of drugs, medicines, implant, stents, valves and other implants are integral to a medical services/procedures and cannot be severed to infer a sale as defined under the Punjab or the Haryana Act and therefore, are not exigible to value added tax - petition allowed - decided in favor of petitioner.

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• 2018 (12) TMI 479
  Input tax credit - purchase of Generator sets and its parts which are capital goods and used in the generation of electricity - electricity further used for running the plant and machinery for production of goods - Held that:- Considering the fact that the State itself issued clarification in the case of M/s Bhaskar Gensets Private Limited, Gurgaon, clarifying the legal issue in favour of the appellant and subsequent thereto even the Tribunal has accepted the appeal in the case of other assessee, we do not find any reason to decline the same relief to the appellant. The substantial question of law is answered in negative - Tribunal was not justified in declining the relief of input tax credit to the appellant of the tax paid on purchase of diesel set for generating power for running the plant and machinery for production of goods, as the same is available in terms of the clarification issued by the department itself - decided in favor of assessee.

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