Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 22, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of GST - penalty/ liquidated damages - supply of service or not - Whether the Bounce Charges collected by the Applicant should be treated as a supply under the GST regime? - Held Yes - Liable to GST
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Levy of GST - Supply of goods or not - pure services - providing energy efficient street lighting services with infrastructure to BMC - pure service should mean pure unadulterated service not mixed with any other element (in this case without any mixture of goods) - Benefit of exemption is not available.
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Supply - e-way bill - The applicant can issue an e-way bill in which the ‘bill to’ will be mentioned in the name of M/s. RSE/RPG whereas ‘ship to’ would be in the name of final customer i.e. M/s. X.
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Rate of GST - supply of non-air conditioned vehicles on hire to Indian Army - Contract carriage - The Service provided by the applicant is not exempted under Notification No. 12/2017 as this Service does not fall under ‘non-airconditioned contract carriage’ category - Rate of GST is 5% if credit is not availed.
Income Tax
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Upward adjustment on arm’s length price - selection of MAM - No infirmity in choosing the Cost Plus Method (CPM) by the assessee to determine the arm’s length price (ALP) of sale of services and purchase of services
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Penalty u/s 271(1)(b) - refusal to answer the notice u/s 142(1) - compliance to tax investigation - if the assessee really had no connection with such accounts, no prejudice could really have ensued to him if he would have complied with the notices - Levy of penalty confirmed for all the seven years.
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Disallowance of Discount on sale of flat - Allowable business expenditure - Revenue cannot sit on the arm chair of the business-men and decide how much expenses should be incurred or how much discount should be offered to the customer.
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TDS u/s 194J - amount reimbursed by the Assessee-University to the affiliated colleges for holding examinations - whether the amount is in the nature of services of professional or technical experties - Held No.
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Capital gain - JDA or agreement for sale - In the instant case, there is no Joint Development Agreement (JDA), but only an unregistered sale agreement, which could not be fulfilled due to external reasons and there was no handing over of possession at any point of time to the purchaser - No capital gain - additions deleted.
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Assessment barred by limitation by virtue of section 153(2A) - whether the time limit prescribed u/s 133(2A) of the I.T.Act is applicable for the assessment i.e. completed on 01.03.2010, pursuant to the ITAT’s order dated 08.03.2007? - the assessment was barred by limitation.
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Deduction u/s 37(1) - earnest money forfeited - As such the alleged amount though is not covered by the provisions of Section 36(1)(viia) but certainly it will be allowable u/s 37(1)
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TDS u/s 195 - where the recipient of income of parent company is not chargeable to tax in India, then the question of deduction of tax at source by the payer would not arise - Decision in the case of Havells India Limited distinguished.
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Whether assessee is entitled to set off the un-absorbed depreciation against the income from other sources ? - there could be no depreciation claimed as against income from other sources.
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Nature of interest income earned from the fixed deposits for opening the letter of credits and for retention of margin money - It can only be income derived from profits and gains of the business.
Customs
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Benefit of exemption - import of specified goods - The deployment on any road construction project would suffice for continuing entitlement to the exemption, the object of utilisation on the different projects must be examined.
Corporate Law
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Delegation by Central Government - powers vested in it under the first proviso to clause (41) of section 2 and second proviso to sub-section (1) of section 14
IBC
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Corporate insolvency proceedings - the decision taken by the Lenders for removing the Resolution Professional at the expiry of the CIRP is not in accordance with the law and the same is illegal and arbitrary action of the lenders and deserves to be set aside.
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Corporate Insolvency Resolution Process - mala fide intention - the corporate applicant filed the application with mala fide intention and with ulterior motive for purpose other than for the resolution.
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Corporate Insolvency Resolution Process - the provisions of Sections 3 & 4 of the ‘Usurious Loans Act, 1918’ are not applicable to any of the proceeding under Section 7 or 9 of the ‘I&B Code’.
Service Tax
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Refund of service tax paid wrongly under the category of renting of immovable property - A tax wrongly realized or paid on in excess of what is permissible in law, is a realization made outside the provisions of the Act. - Period of limitation u/s 11B of the Central Excise Act, not applicable in this case.
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Classification of services - Business Auxiliary Service or not - The scope of the work is to act as collection agents of ICICI. Such activity would definitely fall under ‘Recovery Agent Service’.
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CENVAT Credit - Construction of the Hotel Building - commonly used input services - security services - Internet Services - in view of Rule 6(5) of CCR thereof no question of denial and reversal of credit
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Refund claim of service tax - validity of period of limitation of 6 months - exemption grated with retrospective effect - vires of Section 103 of the Finance Act, 1994 - Courts have often hold that period of limitation for claiming refund is mandatory - Cannot be extended further.
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Extended period of limitation - penalty - service tax rate was revised from 8% to 10.2% - the issue being of interpretation of law, longer period of demand cannot be invoked, hence the demand for the extended period was set aside - No penalty.
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Refund claim - time limitation - duty became finally refundable to the appellant only after the decision of the CESTAT and as per above said sub clause (ec) of Clause B, the claim could have been filed within one year form the date of this Tribunal Order.
Central Excise
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Clandestine removal - Recovery of the registers/documents/lose papers maintained in the assessee’s factory for internal movement of the goods from one section to another, by itself, are not sufficient to establish the clandestine activities.
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Jurisdiction to raise demand u/s 11A central excise - extended period of limitation - petitioner availed the benefit of the Duty Free Credit Entitlement (DFCE) scheme. - the petitioner claimed to be a manufacturer and obtained registration for the same, the adjudicating authority found the petitioner to be a trader - Issuance of SCN and order sustained.
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CENVAT Credit - Fire extinguishers are qualified under Chapter 84. Hence, are the capital goods in view of Rule 2 (A) (i) of CCR. Otherwise also fire extinguishers are the statutory mandate for any premise to be sanctioned for its use - credit allowed.
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CENVAT Credit - input services - the cost of catering services has been born by the appellant company and has not been recovered from the employees. Such service is therefore held to be an input service for which the appellant was entitled to take the credit.
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Valuation - stock transfers to depots at the prices prevalent on such date at the depots - depot sale price known prior to removal on which duty was paid - On subsequent sale at the depot, the depot invoice indicates the very same price - highest price not to be taken - demand set aside.
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Clandestine removal - Merely because there are certain cash deposits in the account of the director of the company, it cannot be concluded that these are amounts received from sale of clandestinely removed finished products
Case Laws:
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GST
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2018 (12) TMI 1158
Maintainability of Advance Ruling Application - Rate of GST - Dietary Services to CIMS Hospital - Held that:- The application is not in the prescribed format as specified GST ARA-01 under section 97(1) of Chhattisgarh State GST Act, 2017 and the applicant has also not deposited the full fee of ₹ 10000/- for advance ruling i.e., ₹ 5000/- for SGST and ₹ 5000/- for CGST as specified in circular no 25/25/2017-GST issued by the Central board of Custom and Indirect tax board on 21.12.2017 - Application is hereby REJECTED as it has not been filed as per the act and rules of State GST act and/or Central GST act.
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2018 (12) TMI 1157
Rate of GST - supply of non-air conditioned vehicles on hire to Indian Army - Contract carriage - N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 - Held that:- The essential ingredient of a contract carriage is that it plies under a contract for a fixed set of passengers, and does not allow any other passenger to board or alight from the carriage at will - The applicant does not satisfy the condition prescribed in clause (a) nor specified in clause (b) of clause (7) of section 2 of the Motor Vehicles Act, 1988 and accordingly, they cannot be considered as ‘non-air conditioned contract carriage’ and are hence not eligible for exemption under the serial no. 15 of the exemption notification no. 12/2017 Central Tax (Rate) dated 28.06.2017. Even if the contract is assumed as ‘non-airconditioned contract carriage’, even then, serial no. 15 of the exemption notification no. 12/2017 Central Tax (Rate) dated 28.06.2017 does not exempt it from GST, as the “hired” non-airconditioned contract carriage are ‘excluded’ from exemption as specifically mentioned in the said notification - the service provided by the applicant falls under ‘rent a cab’ service. Ruling:- The Service provided by the applicant is not exempted under Notification No. 12/2017 dated 28.06.2017 as this Service does not fall under ‘non-airconditioned contract carriage’ category - The service provided is ‘rent a cab’ Service, which attracts IGST @ 5% (CGST @ 2.5% and SGST @ 2.5%) provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle) has not been taken or IGST @ 12% (CGST @ 6% and SGST @ 6%) if input tax credit is availed.
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2018 (12) TMI 1156
Supply - e-way bill - supply from M/s. SSPL to M/s. X - “Bill to Ship to” mode - Section 10(1) (b) of IGST Act, 2017 - “ship to” of ultimate customer M/s. X - input tax credit - related person. Held that:- The cycle of supply of goods from the applicant to the final customer, involves four persons. i.e. the applicant, M/s. RSE/RPG, M/s. Goyal and the M/s. X - Section 10(1)(b) of IGST Act, 2017 does nowhere limit the transaction to only three parties/ persons. The said section only contemplates about role of ‘third party’ and declaration of ‘principal place of business’. Therefore, the supply from M/s. SSPL to M/S. X on a “Bill to Ship to” mode as per provisions of Section 10(1) (b) of IGST Act, 2017 is permissible. The Press Note of ministry of Finance on “Issues regarding Bill to Ship to for e-way bill under CGST rules 2017” dated 23.04.2018 clearly emphasise that only a single e-way bill is to be issued either from the supplier of goods or by third party - In the instant case, the applicant can issue an e-way bill in which the ‘bill to’ will be mentioned in the name of M/S RSE/RPG whereas ‘ship to’ would be in the name of final customer i.e. M/S X. Input tax credit - Held that:- TMT Steel Bars manufactured by the applicant is similar in quality of what is made by M/s. RSE/RPG, (trademark contract is emphasising on it) and therefore, the value of supply of goods can be ascertained or established in accordance with Section 15 of CGST Act read with second proviso of Rule 28 of CGST Rules, 2017 with eligibility to full Input Tax Credit. Related party transaction - Held that:- The relationship between M/s Goyal and M/s X is not Related party relationship in accordance with sub-section (4) and (5) of section 25 of CGST Act, 2017. Thus, the transactions between M/s. Goyal and the ultimate customer i.e. M/S. X would be covered by the provisions of Section 15 of CGST Act, 2017. Ruling:- The supply from M/s. SSPL to M/s. X on a “Bill to Ship to” mode as per provisions of Section 10(1) (b) of IGST Act, 2017 is permissible. The applicant can issue an e-way bill in which the ‘bill to’ will be mentioned in the name of M/s. RSE/RPG whereas ‘ship to’ would be in the name of final customer i.e. M/s. X. The provisions of Section 15 of the CGST Act, 2017 read with Rule 28 of CGST Rules, 2017 and in particular the second proviso to Rule 28 would apply for the value of supply for the transactions between M/s. SSPL and M/s. RSE with availability of full Input Tax Credit. The transactions between M/s. Goyal and M/s. X (the ultimate customer) would be covered under the provisions of Section 15 as both are unrelated persons. (as declared in submissions by the applicant).
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2018 (12) TMI 1155
Levy of GST - Supply of goods or not - pure services - services provided by them by way of providing energy saving street lighting services including OM of the street lighting installations to Bhubaneswar Municipal Corporation (BMC) - Entry No. 3 of Notification No. 12/2017-CentraI Tax. Held that:- There is no clarity as to whether the service supplied is a case of pure service and whether the contract in pursuance to which the service is being supplied by the applicant to BMC is not a works contract. In fact, the present ruling entirely hinges on answer to the first question i.e., whether the supply is a case of supply of pure service. The term pure service has not been deemed in the said notification for which it has to be understood by applying the common parlance test and general understanding. As per dictionary, pure means unadulterated and unmixed. Accordingly, pure service should mean pure unadulterated service not mixed with any other element (in this case without any mixture of goods). The consideration payable to the applicant includes the cost of acquisition of the business assets i.e. ‘the energy efficient street light infrastructure’ set up by the applicant at the end of the contract period. Such transfer of business assets from the applicant to BMC is admittedly not covered in clause (c) of para 1 of Schedule II of the CGST/OGST Acts - Thus, it is not a case of supply of pure service but rather a case of supply with substantial use of goods. At the time of personal hearing, on a query raised by the authority it was explained by the applicant that during the period from 01.07.2017, till the date of hearing materials such as street Lights Control Panel and LED Bulbs etc. of value ₹ 3,89,72,117/- have been moved to Bhubaneshwar project from the manufacturing plant. This is a substantial amount and with material movement at this scale, the ultimate supply to BMC cannot be held as a case of supply of puce service. Thus, on this account, the condition is not fulfilled. The activities undertaken by the applicant do not constitute supply of ‘pure services’ as it involves significant use of goods/materials. It is also a case of supply of works contract service by the Applicant to BMC. The benefit of exemption from tax in terms of S 1.3 of the notification No. 12/2017- Central Tax (Rate), dated 28.06.2017 is not available to the applicant - When there is ambiguity In exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject / assessee and it must be interpreted in favour of the revenue.” Further, Entry at Sl. No. 3 of the notification No. 12/2017-central tax dated 28.06.2017 is unambiguous and it cannot be stretched or construed otherwise. It has no extension and putting any other extension is neither warranted nor intended to and would lead to absurd conclusion not called for and would render the notification entry redundant. Ruling:- The services provided by the applicant by way of providing energy efficient street lighting services including 0M of the street lighting infrastructure during the contracted period to Bhubaneswar Municipal Corporation (BMC) do not constitute supply of pure services as it involves significant use of goods/materials with stipulation to transfer the total business assets to BMC at the end of the contract period. The benefit of exemption from tax in terms of S 1.3 of the notification No. 12/2017- Central Tax (Rate), dated 28.06.2017 is not available to the applicant.
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2018 (12) TMI 1154
Levy of GST - penalty/ liquidated damages - supply of service or not - Whether the Bounce Charges collected by the Applicant should be treated as a supply under the GST regime? - Held that:- The receipt of bounce charges would be receipt of amounts for tolerating the act of their customers for having bounced the cheque or any other mode of payment. In view thereof, the same would definitely be a supply under the GST Act and therefore, there arises an occasion to levy tax under the GST Act on the impugned transactions - the receipt of bounce charges on dishonor of cheques, etc, would be receipt of amounts for tolerating the act of their customers for having dishonored or where the client could not honour the said cheques and the same, would definitely be a supply under the GST Act and therefore, there clearly arises an occasion to levy tax under the GST Act on the impugned transactions. There is clearly an agreement that the applicant, in the case of bouncing of cheques, etc by their customer, the applicant would tolerate such act of default or a situation and the defaulting party i.e their customer was required to compensate the applicant by way of payment of extra amounts in addition to principal and interest as per the terms and conditions of the Agreement. It is also very clear as to the amount or quantum which is consideration in the form of bounce charges to be received by the applicant if these, are suitable compensation only for tolerating the act of default or situation of default by their customers and they have clearly foreseen that such situation can be there and have, in their agreement, clearly devised a suitable mechanism for receipt of charges for the same and it is not additional interest as claimed by the applicant. In the present case, there is a clear understanding or agreement between the parties in the present case to foresee and tolerate an act or a situation of default on the part of the client for a monetary consideration which is actually a consideration received by the applicant, though in the agreement they may be giving this consideration, other names such as penal charges , penalty, Bounce Charges, etc, as thought proper by them, but these different nomenclatures in their Agreement would in no way change the actual nature of monetary consideration which would clearly be taxable for the supply of services as per Sr.No. 5(e) of Sch. II of the CGST Act, 2018. The exemption for financial transactions under GST laws is only in respect of the interest/discount earned or paid for loans, deposits or advances. If the transaction, as in the subject case deviates from the above, i.e. the consideration not being an interest or discount, the exemption is not available - Dishonour of cheques i.e. a mode of repayment to the applicant by their customers, is an act which results in delay of receipt of repayments to the applicant. This delay is an act done by their customers which is tolerated by the applicant because inspite of such dishonour the applicant proposes to continue the agreement with the defaulting party. The recovery of bounce charges is made in view of toleration of the act of the client by the applicant and therefore construes as supply as per as per Sr. No. 5(e) of Sch. II of the CGST Act and is therefore taxable under the GST Act. Ruling:- The Bounce Charges collected by the Applicant should be treated as a supply under the GST regime.
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2018 (12) TMI 1153
Classification of goods - interpretation of statute - Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907” in entry number 252 of the schedule 1 of the Notification No 01/2017-lntegrated Tax (Rate) - Rate of tax - specific list of inputs raw materials, parts and consumables etc., purchased or imported for use in manufacture of warship - Procedure to be followed with Vendors if rate of tax applicable is as per entry no. 252 of the Schedule I - Input tax credit. Held that:- We have listed a list of items which cannot be considered as a part of a warship/ submarine. Other than that all the equipments/ tools, etc can be considered as parts of a submarine/warship, without which the same would not be complete and would not exist. These are very integral for the functioning of the submarine/ warship - except for the items listed by us above from the Annexure B and Addendums to Annexure B, all other items can be considered as parts of a ship and therefore would be eligible to concessional rate of GST as contended by the applicant. Ruling:- Only those Annexure B items which are not listed above will be considered as parts of warship falling under 8906 and will be covered under entry number 252 of the schedule 1 of the Notification No 01/2017-Integrated Tax (Rate). The items/ goods which are considered as parts of warships, in the discussions above will be covered under entry number 252 of the schedule I of the Notification No. 01/2017-lntegrated Tax (Rate) and liable to GST @ 5% (2.5% each under CGST and SGST) and for the other items, the tax rate will be applicable as per the respective Scheduled Entry in which the goods fall.
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2018 (12) TMI 1152
Detention of goods with vehicle - Held that:- Division Bench of this Court in Renji Lal Damodaran v. State Tax Officer [2018 (8) TMI 1145 - KERALA HIGH COURT] has dealt with an identical issue, where it was held that It is directed to release the goods on the appellant furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules. The respondent authorities is directed to release the petitioners' goods and vehicle on their furnishing Bank Guarantee for the tax and penalty due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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Income Tax
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2018 (12) TMI 1151
Reopening of assessment - wrongful computation of the capital gain - petitioner's contention that the execution of the sale deed by virtue of the judgment of the High Court would relate back to the original agreement to sale - Held that:- Assessee had entered into an agreement for purchase of the property in the year 1992. The sale deed could not be executed only because the appropriate authority refused to grant no objection certificate and instead, ordered compulsory acquisition thereof. This order was declared as illegal and ab initio void by the High Court. The sale deed was ordered to be executed in favour of the petitioner. There is no reason for us not to accept the petitioner's contention that the execution of the sale deed by virtue of the judgment of the High Court would relate back to the original agreement to sale. The petitioner was, thus, entitled to claim the benefit of cost indexation from the said date. The entire basis of the department in the reasons recored in order to dispute the petitioner's computation of the capital gain, therefore, is rendered invalid. In the result, the impugned notice is set aside. - decided in favour of assessee.
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2018 (12) TMI 1150
Interest income earned from the fixed deposits for opening the letter of credits and for retention of margin money - income from other sources OR profits and gains of business - Held that:- The deposits made are in pursuance of the contract and but for the contract, there was no warrant for making the deposits or earning income by way of interest. As we already stated, the deposit and the income generated by way of interest, are intrinsically connected with the contract, the business engaged in by the assessee. It can only be income derived from profits and gains of the business. We hence answer the first question in favour of the assessee and against the Revenue. Whether assessee is entitled to set off the un-absorbed depreciation against the income from other sources ? - Held that:- The second question requires no answer at our hands for it being a settled position that there could be no depreciation claimed as against income from other sources. This will have no effect in the case of the assessee insofar as the first question being answered in their favour.
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2018 (12) TMI 1149
TDS u/s 194J - amount reimbursed by the Assessee-University to the affiliated colleges for holding examinations - whether the amount is in the nature of services of professional or technical experties - non deduction of tds - Held that:- Tribunal in considering the matter held that no doubt the payment of expenditure incurred by the affiliated colleges/centres is reimbursable but there is no involvement of professional or technical experties. The affiliated colleges/centres do not render any technical services in conducting of the examination. The Tribunal further observed that the revenue in the past and in the subsequent years has never raised such an objection. Thus, in the absence of any material to establish that the affiliated colleges/centres were rendering services of professional or technical nature in the matter of conducting the University's examination, we are of the opinion that the Tribunal has not committed any error of law in holding that the tax was not deductable on such reimbursement under Section 194J(b) - No substantial question of law.
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2018 (12) TMI 1148
Registration u/s 12AA and approval u/s 80G - Held that:- Tribunal after analyzing the objectives of the trust, found it to be for the purpose of helping others irrespective of caste, creed and religion and the object was to provide education and the object was found to be philanthropic. Revenue has not been able to dislodge the finding given by the Tribunal with any admissible material. Therefore, we are of the considered view that the order passed by the Tribunal is just and proper and does not call for any interference. Substantial Question of Law is answered against the Revenue.
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2018 (12) TMI 1147
Interest paid on the borrowed funds as claimed as an allowable expenditure by the assessee u/s 36(1)(iii) read with Section 57 - Tribunal ruled that the said interest payment by the assessee in acquiring control of the two companies would result in earning exempt dividend income and, therefore, the same was not allowable - Held that:- Section 37 covers expenditure of a general nature which are not classifiable under Sections 30 to 36. But, they ought not to be capital expenditure or personal expenses of the assessee. That expenditure which is wholly and exclusively laid out for the purpose of business or profession shall be allowed in computing the income chargeable. The Tribunal had to go into this question only. What the Tribunal has done is simply amazing. Now Section 14A provides that in respect of exempt income the expenditure for earning the said income shall not be allowed. Tribunal ruled that the said interest payment by the assessee in acquiring control of the two companies would result in earning exempt dividend income and, therefore, the same was not allowable. It was as if an imaginery income and expenditure of a subsequent assessment year was taken into account for calculating the income of a particular previous year. All that the Tribunal was required to ascertain was whether the interest paid on fund generated for the purpose of gaining control of the two companies would be allowed as an expenditure and not delve into the question whether the income which that investment would produce in the future would be dividend. It had to see whether any part of the income of the assessee for the assessment year was dividend income; and whether any part of the expenditure for acquiring control of the two companies were being applied to claim deduction from that income. The impugned order of the tribunal dated 11th April, 2008 is set aside.
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2018 (12) TMI 1146
TDS u/s 195 - disallowance u/s 40 (a)(i) - non deduction of tds on fees for technical services to one foreign based company M/s. Pacific Hub Corporation, Philippines - Income deeded to accrue or arise in India - whether payment received by PHP, Philippines was deemed to be income of PHP Philippines in terms of Section 9[1](vii) read with Section 5 [2] - Held that:- In the present case, the Commissioner [Appeals] and the Tribunal have accepted assessee’s factual assertion that the payments were for technical services provided by a nonresident, for providing services to be utilized for serving the assessee’s foreign clients. Thus, the fees for technical services was paid by the assessee for the purpose of making or earning any income from any source outside India. Clearly, the source of income namely the assessee’s customers were the foreign based companies. In the view by a judgment of Karnataka High Court in the case of Commissioner of Income tax, Bangalore v. ITC Hotels Limited, reported in [ [2015 (8) TMI 987 - KARNATAKA HIGH COURT]] in which it was held that where the recipient of income of parent company is not chargeable to tax in India, then the question of deduction of tax at source by the payer would not arise. Delhi High Court in the case of Commissioner of Income tax vs. Havells India Limited, reported in [2012 (5) TMI 449 - DELHI HIGH COURT] was of the opinion that the payment made by the assessee to a US based company for certification facilitating export was not in relation to the source of income which was based in India. The facts were thus different. In the present case, we have primarily gone on the question of the nature of assessee’s activities and the nature of services rendered by the parent based company, for which commission was paid. - Decided against revenue
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2018 (12) TMI 1145
Disallowance u/s.14A r.w.r. 8D - Held that:- The exposition of law made by the Supreme Court in case of S. A. Builders [2006 (12) TMI 82 - SUPREME COURT] and observation made therein have been applied by this court on various occasions, particularly in connection with the disallowance to be made under Section 14A of the Act. It has been held that if the assessee can demonstrate availability of surplus interest free funds for making investment generating tax free income, disallowance under Section 14A of the Act would not be justified. As decided in assessee's own case Section 14A read with Rule 8D could be applied only after the Assessing Officer is not satisfied with the claim of the assessee regarding the expenditure [2017 (9) TMI 531 - GUJARAT HIGH COURT] The judgment in case of Maxopp Investment Ltd.[2018 (3) TMI 805 - SUPREME COURT OF INDIA] does not lay down a proposition that the moment it is demonstrated that the assessee had availed of mixed funds i.e. interest free as well as interest bearing funds and utilized them for making investments into securities earning tax free income and the rest applicability of the Section 14A read with Rule 8D would be automatic. - Decided against revenue
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2018 (12) TMI 1144
Disallowance u/s 37(1) treating the earnest money forfeited by Maruti Suzuki India Pvt. Ltd as capital expenditure - whether the alleged amount is a capital expenditure or revenue expenditure? - Held that:- the alleged earnest money was paid by the assessee to Maruti Suzuki India Ltd in its capacity as a person carrying on business and the contract for taking an agency of vehicle manufactured by Maruti Suzuki India Ltd was a business contract entered into with a view to earn profit and it was not made or secure any capital asset or a advantage endeavour in nature. As such the alleged amount though is not covered by the provisions of Section 36(1)(viia) of the Act but certainly it will be allowable u/s 37(1) of the Act - Decided in favour of assessee.
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2018 (12) TMI 1143
Revision u/s 263 - rejection of application u/s 12AA - Held that:- There is no dispute with regard to the fact that question of validity of rejection of application for registration u/s 12AA of the Act is pending before this Tribunal. It is also not disputed that the assessments have been framed in pursuance to rejection of application u/s 12AA of the Act. Ld. Counsel for the assessee has relied on the judgement of Hon'ble A.P. High Court in the case of ITO Vs. Khalid Mehdi Khan [1977 (1) TMI 26 - ANDHRA PRADESH HIGH COURT] thus we hereby direct the A.O. to stay the assessment proceedings for a period of 60 days or till the disposal of present appeal as pending whichever is earlier. - Registry is directed to fix the hearing of appeal on 15.01.2019, in view of the Hon'ble President’s directive to disposal of stay granted matters expeditiously.
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2018 (12) TMI 1142
Assessment barred by limitation by virtue of section 153(2A) - whether the time limit prescribed u/s 133(2A) of the I.T.Act is applicable for the assessment i.e. completed on 01.03.2010, pursuant to the ITAT’s order dated 08.03.2007? - Held that:- Section 153A states – “Notwithstanding anything contained in sub-section (1), (1A), (1B) and (2), in relation to the AY commencing on the 1st day of April 1971, and any subsequent AY, an order of fresh assessment in pursuance of an order u/s 250, sec. 254, sec. 263, or sec.264, setting aside or cancelling an assessment, may be made at any time beforethe expiry of one year from the end of the financial year in which the order u/s 250 or sec. 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order u/s 263 or sec. 264 is passed by the Chief Commissioner or Commissioner.” In the instant case, the Tribunal order dated 08.03.2007 was admittedly served on the Commissioner of Income-tax on 20.03.2007. Therefore, going by the dictum laid down in the case of Dr.R.P.Patel v. ACIT [2015 (3) TMI 1291 - KERALA HIGH COURT] the assessment ought to have been completed on or before 31.12.2007. Since the assessment order pursuant to the Tribunal order was completed only on 01.03.2010, we hold that the assessment was barred by limitation. - Decided in favour of assessee
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2018 (12) TMI 1141
Addition u/s 68 - assessment u/s 153A - Held that:- CIT(A) has rightly held that there is no incriminating documents/assets found during the search operation. Though the DR disputed the same, but could not demonstrate that the documents are incriminating in nature. In fact, these documents prove the transactions of the assessee as claimed by the assessee in its books of accounts which were produced before the AO during the assessment proceedings. The CIT(A) has given a detailed and reasoned order on merit as well and the Ld. DR could not make out any contrary facts as stated in the order of the CIT(A). The submission of the Ld. DR that the documents were not filed before the AO is also not correct as these documents have been submitted before the AO as per the record. Therefore, there is no need to interfere with the findings of the CIT (A). This appeal filed by the Revenue does not survive.
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2018 (12) TMI 1140
Reopening of assessment - reopening on basis of report of the Investigation Wing - non independent application of mind - Held that:- In the instant case, AO has reopened the assessment merely on the basis of the report of the Investigation Wing without independent application of his mind as he is not aware as to whether the assessment is proposed to be made for the first time since the records are not traceable and since the additional CIT in a mechanical manner has given approval, therefore, we are of the considered opinion that the assumption of jurisdiction u/s 147/148 in the instant case is not as per law. Quash the reassessment proceedings initiated by the AO merely on the basis of report of the Investigation Wing and due to non-application of mind. The legal ground raised by the assessee is accordingly, allowed. Since the assessee succeeds on this legal ground, therefore, the grounds relating to the merit of the case become academic in nature and, therefore, are not being adjudicated. - Decided in favour of assessee
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2018 (12) TMI 1139
Penalty u/s. 271(1)(C) - deemed income u/s. 2(22)(e) - Held that:- Additions on which the penalty in dispute was levied, has already been deleted by the ITAT, except the addition of ₹ 13,634/- which was not pressed by the assessee in quantum appeal in assessee’s own case as aforesaid, hence, the penalty in dispute will not survive on the additions in dispute, except the penalty on the addition of ₹ 13,634/- which was not pressed by the assessee in quantum appeal before the Tribunal[2018 (11) TMI 1008 - ITAT DELHI]. Accordingly, we delete the penalty in dispute and sustain the penalty on the addition. - Decided partly in favour of assessee.
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2018 (12) TMI 1138
Capital gain - JDA or agreement for sale - eligible transfer u/s 2(47) - as submitted by assessee possession in question of the impugned property was never handed over to the purchaser, hence, there was no part performance of the contract as per the terms of section 53A of the Transfer of Property Act - Held that:- The agreement for sale dated 12. 12. 2008 and the cancellation of agreement dated 04. 05. 2011 are on record. Clauses of agreement for sale states that the possession of the property is to be handed over to the buyer only when the entire sale consideration is paid by the purchaser. In the instant case, the entire sale consideration was never paid by the purchaser. The sale agreement dated 12. 12. 2008 was cancelled vide agreement dated 04. 05. 2011 and prior to the cancellation of sale agreement, substantial portion of advance received by the assessee was refunded to the intended purchaser. The agreement for sale is not a registered document. As held in the case of CIT v. Balbir Singh Maini (2017 (10) TMI 323 - SUPREME COURT OF INDIA) that after amendment of Registration Act, 1908 in the year 2001, unless the document containing the contract to transfer any immovable property is registered, it shall not have any effect in law. In the instant case, there is no Joint Development Agreement (JDA), but only an unregistered sale agreement, which could not be fulfilled due to external reasons and there was no handing over of possession at any point of time to the purchaser. The property in question as on the date is still with the assessee and there is no transfer of the impugned property at any point of time. Therefore, the addition made by the Assessing Officer is uncalled for and we uphold the finding of the CIT(A) - we hold that the CIT(A) is justified in deleting the addition of Long Term Capital Gain - Decided against revenue
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2018 (12) TMI 1137
Extension of stay of outstanding demand - delay in disposal of appeal - delay was not attributable to the assessee - Held that:- We find that the averments of the assessee in as much as that delay is not attributable to the assessee all borne out from the record. We are informed that the hearing which stood concluded pertaining to 2009-10. Taking note of the fact that there is no change in facts and circumstances as noted by the coordinate benches we find that in the facts of the present case, since delay is not attributable to the assessee, thus prima facie the assessee has a good case for extension of stay. Accordingly, considering the balance of convenience we extend the stay for a period of 6 months or till the disposal of the appeal whichever is earlier. The assessee shall ensure that no adjournment is moved except for bonafide reasons if need be.
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2018 (12) TMI 1136
Addition on account of loans u/s 68 - Held that:- It is an admitted fact that there are common names in the loan creditors and the list of investments in shares of certain companies of the group. This is the admitted position as evident from the application filed before the ITSC. It is the claim of the assessee that the transactions entered into by such names of persons can be partly genuine when it comes to “unsecured loans” and partly bogus when it comes to “investment in shares”. This aspect was not properly examined by the CIT(A) applying the strict tests while adjudicating the issue and while granting part relief to the assessee. This is the case of Revenue, when it comes to the unsecured loans, that the relief was liberally granted by the CIT(A) without scrutinizing the loan transactions properly. As we examined the documentation filed by the assessee with regard to the correctness of the transactions of loan creditors. We find “all is not well” with the documentation qua the creditworthiness, signatures on the confirmations, PANs etc. It is not justified as to why the creditors failed to give their signatures on the confirmation letters. Addition on account of agricultural income - Held that:- As decided in DEVENDRA P. SHAH, VERSUS DCIT, CENTRAL CIRCLE-1 (1) , PUNE AND VICE-VERSA [2018 (10) TMI 1625 - ITAT PUNE] as per CIT(A) Net agricultural income is assessed at 65% of the gross agricultural income Assessee-Net agricultural income is assessed at 88% of the gross agricultural income - decision of CIT(A) is appropriate and it does not call for any interference. Unexplained Jewellery - Held that:- The jewellery found during the course of search action was worth ₹ 2.88 crores out of the same assessee disclosed ₹ 2.20 crores as unaccounted income of the assessee leaving the balance of ₹ 68 lakhs. The amount added in the hands of Netra P. Shah (wife of assessee) now stands deleted by the Tribunal. The relevant extract of the order of the Tribunal is given above. Considering the commonality of the facts, we are of the opinion the said order of the Tribunal in the case of Netra P. Shah (supra) is applicable to the facts of the issue under consideration. Accordingly, the issue decided in favour of the present assessee too for the same reasoning. Unexplained investment in FDRs - Held that:- this matter needs examination in the light of the details of the cash flow. In case of availability of sufficient cash balance is demonstrated by the assessee in the remand proceedings, the benefit of excess cash needs to be granted in favour of the assessee. Only exception to this principle is that the AO should examine the likely use of such excess cash for any other expenditure other than for making the said FDs claimed by the assessee.
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2018 (12) TMI 1135
Addition u/s 68 - genuineness of loan - Held that:- When the assessee has produced the director before the learned assessing officer but after the assessment order has been passed one day prior to the appearance by the director of the lender company, in the interest of justice, the matter is restored back to the file of the learned assessing officer with a direction to the assessee to produce the director of the lender company before the assessing officer along with any other detail which assessee would like to substantiate the transaction. AO is further directed to examine the details furnished by the assessee as well as the director of the lender company and decide the issue afresh. We further direct the learned assessing officer to not to get influenced by the observation of the learned CIT-A about the nil income of the lender because there may be any other source available with the company to advance loan to the assessee. He may examine the issue for ascertaining the creditworthiness of the lender and genuineness of the transaction. In the result ground number 1 of the appeal of the assessee is allowed with above direction.
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2018 (12) TMI 1134
Penalty u/s 271(1)(b) - refusal to answer the notice under Section 142(1) - notice u/s 142 (1) was issued on 18/7/ 2013 and date was fixed for the compliance was 22/7/2013 - Held that:- Respectfully following the decision of Mr. Sanjay Dalamia [2018 (3) TMI 1411 - DELHI HIGH COURT] as held if the assessee really had no connection with such accounts, no prejudice could really have ensued to him if he would have complied with the notice under Section 142(1) of the Act and filed the consent form. In these circumstances, the penalty cannot be held to be erroneous or unwarranted. Penalty u/s 271(1)(b) of the act is upheld for all these seven years arising out of the same search and relating to the same bank account and for the same reason of not filing the consent letter, we also confirm the penalty levied by the AO for all these seven years u/s 271(1)(b) of the act in case of the appellant. We also uphold the order of the ld CIT (A) for all these seven years confirming the penalty levied u/s 271(1)(b) of the act of ₹ 10,000/- for each year. - Decided against assessee.
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2018 (12) TMI 1133
Upward adjustment on arm’s length price - selection of MAM - assessee objected that method adopted by ld. Commissioner are not in sync with reality - cost plus method (CPM) v/s Transactional Net Margin Method (TNMM) - Held that:- The stand of the DR that the assessee has selected TNMM as a most appropriate method (MAM) by using terminology, in his TP-Study Report, as PBIT/Sales to compute the ALP and the assessee cannot resort to change his method at the appellate stage, is not acceptable for the reasons given above. Such a contention cannot be upheld because it is found on the facts of the case that if a particular method will not result into proper determination of ALP, the TPO or the Appellate Authorities can very well hold that why a particular method can be applied for getting proper determination of ALP, or the assessee can demonstrate the particular method to justify its ALP. The ultimate aim of the TPO to examine whether the price or the margin arising from an international transaction with a related party is at ALP or not. The determination of the ALP is the key factor for which the MAM is to be followed. Therefore, if at any stage of the proceedings, it is found that by adopting one of the prescribed method other than the one chosen earlier, the ALP can be determined, the TPO as well as the CIT(A) should take into consideration such a plea before them, provided, it is demonstrated as to why the change in the method will produce better or more appropriate ALP on facts of the case. Therefore, we reject the contention of the ld. DR and also the observation of the TPO that the assessee cannot resort to adopt the Cost Plus Method (CPM) instead of TNMM for its purchase and sale of services. No infirmity in choosing the Cost Plus Method (CPM) by the assessee to determine the arm’s length price (ALP) of sale of services and purchase of services, hence we delete the transfer pricing adjustment - Decided in favour of assessee Disallowance u/s 14A other than what the assessee had suo-moto disallowed - Held that:- As decided in the case of REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules also confirmed by HC [2014 (4) TMI 713 - CALCUTTA HIGH COURT] - Thus we direct the assessing officer to compute the disallowance under rule 8D(2)(ii) and under rule 8D(2)(iii), by taking into account the dividend bearing securities/investments. Therefore, we allow this ground of appeal raised by the assessee for statistical purposes. Additions made with respect to unbilled revenue which is already included in the revenue/income of the company - Held that:- DRP had already given instruction to the Assessing Officer to examine whether the assessee had included unbilled revenue in his turnover and offered for tax or not. We note that the Assessing Officer had not followed the direction of the DRP in right perspective and he did not examine accounts of the assessee to find out whether the assessee had offered the same for taxation or not - direct the AO/TPO to examine the books of accounts of the assessee and if the assessee has included the turnover on accrual basis of accounting and offered for taxation then the addition should not be made or if this unbilled revenue has not been included in the Assessment Year under consideration and has been included in the subsequent Assessment Year, the same fact should also be examined that the assessee has offered for taxation the said unbilled revenue in subsequent year. - Appeal Decided partly in favour of assessee.
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2018 (12) TMI 1132
Disallowance u/s 14A - Held that:- Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT], no expenses can be disallowed u/s 14A as the assessee has not earned any exempt income. Same view has been taken by the Hon’ble Bombay High Court in the case of Pr. CIT v. Ballarpur Industries Ltd. [2016 (10) TMI 1039 - BOMBAY HIGH COURT]. We, therefore, deleted the disallowance sustained by the Ld. CIT(A).- Decided in favour of assessee Addition on account of cenvat credit in valuation of Stock - Held that:- Similar issue arose before the ITAT ‘E’ Bench, Mumbai in assessee’s own case for AY 2008-09 [2017 (9) TMI 726 - ITAT MUMBAI] held since the issue involved related to the valuation of the closing stock in respect of raw material, the question of any disallowance u/s 43 B will also not arise. We have already held that the profit of the assessee cannot be effected if the assessee followed the inclusive method of accounting or the exclusive method of accounting because in any case the stock is increased to that extent the debit side in the P & L account which will be increased by the increase in value of opening stock as well as the cost of the purchase due to the inclusion of the excise duty incurred by the assessee at the time of the purchase of the raw materials - decided in favour of assessee
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2018 (12) TMI 1131
TDS u/s 194A - non deduction of tds on interest payment to various NBFCs - Held that:- It is abundantly clear that equipment loans had been availed by the assessee from four finance Companies namely M/s Tata Capital and Finance Services Ltd., M/s L & T Finance, M/s SREI Equipment & Finance Pvt. Ltd and M/s Sreeram Equipment Finance Co. Ltd. We note that on all such loans, monthly deduction of principal and proportionate interest had been paid by the assessee and claimed in the accounts as finance charges. The total interest debited during the year amounted to ₹ 4,41,12,661/- without any deduction of TDS. However, out of the four finance Companies, two Companies namely M/s L & T Finance and M/s SREI Equipment and Finance Pvt. Ltd. had issued confirmation to payer Company that they have duly included the same in their income. For the other two Companies, Chartered Accountant's certificates confirming that the interest so received have all been duly credited to their income, were also received by the payer company. Therefore, in view of the insertion of second proviso of section 40(a)(ia) and proviso of section 201(1) which are curative and retrospective in nature, the addition made by the AO should be deleted. - Decided against revenue.
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2018 (12) TMI 1130
Disallowance of Discount on sale of flat - Allowable business expenditure - AO disallowed the said discount stating that some of the parties to whom the discount had been given, had informed that no discount received from assessee - Not allowing the assessee to cross-examine the witness by the adjudicating authority - Held that:- The assessee has incurred the said expenses for the purpose of business, therefore, he is eligible to claim the deduction on account of discount allowed on sale of flat. Revenue cannot sit on the arm chair of the business-men and decide how much expenses should be incurred or how much discount should be offered to the customer. Since, some of the customers, who denied that no discount was received by them, does not mean that assessee claim is bogus. AO has not given an opportunity to cross-examine these customers, who denied the receipt of discount. Not allowing the assessee to cross-examine the witness by the adjudicating authority, though the statements of those witnesses were made the basis of the impugned addition, is a serious flaw, which makes the order nullity. See case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT]. - Decided in favour of assessee.
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2018 (12) TMI 1129
Addition of unsecured loan and being the interest thereon - Held that:- In this case, the loan creditor has even shown the source of the loan disbursed to the assessee (from funds it received from M/s. Godavari Exim Pvt. Ltd. as discussed) and we note that the AO has not made any exercise to discredit the loan creditor in any manner other than making certain general observations of the accommodation entry providers which cannot be the legal basis for disbelieving the loan the assessee received from M/s. Pasupati Tradelink Pvt. Ltd. and which amount the assessee has repaid as is evident from the correspondence between the assessee and the AO of the lender company as discussed above. The assessee has discharged the onus by placing all the documents before the AO/Ld. CIT(A) as discussed above. CIT(A) erred in not giving credence to the aforesaid documents filed before him without any adverse material to substantiate his stand. Hence, we are inclined to delete the addition of ₹ 40 lakhs which the assessee has taken as loan as well as the interest which the assessee has given to the lender of ₹ 4,22,531/-. The additional disallowance u/s. 37(1)is also deleted. - decided in favour of assessee.
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2018 (12) TMI 1128
Reopening of assessment - Receipt of accommodation entries - addition of gross profit only with respect to the alleged bogus purchase of the goods - Held that:- The reasons recorded shows that assessee has received an accommodation entry from Mohit international for purchase of diamond. The income of the assessee was not assessed earlier under section 143 (3) of the income tax act. There is a tangible material available with the learned assessing officer to reopen the case of the assessee as it was found that Mohit international is operated by Mr. Praveen Jain who is an accommodation entry provider. Further the first proviso to section 147 applies only with respect to the assessment made under section 143 (3) of the income tax act and not otherwise. In view of this, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the reassessment proceedings. On the merits when the assessee has already shown gross profit in the books of account on sale of those goods which are allegedly purchased from an accommodation entry provider no further addition can be made on account of the gross profit as it would amount to double addition. Hence we reverse the finding of the learned commissioner of income tax appeals in upholding the addition of ₹ 9 0000/- . However with respect to the addition of rupees 11360 on account of the alleged commission on the accommodation entry provided by the Praveen Jain group, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the addition to that extent for the simple reason that there is no denial from the assessee that assessee has not purchased goods from M/s Mohit international which is part of Praveen Jain group. - Decided partly in favour of assessee.
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2018 (12) TMI 1091
Penalty u/s 271(1)(c) - Non specification of charge - Held that:- A.O has made proper satisfaction in the body of the assessment order but in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act he failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the Ld. A.O in not making proper specific charge in the notice u/s 274 about the addition for which penalty proceedings have been initiated. Ld. A.O should be clear as to whether the alleged addition goes under the limb of “concealment of particulars of income” or “furnishing inaccurate particulars of income”. Merely issuing notice in general proforma will negate the very purpose of natural justice as held by the Hon'ble Apex Court in the case of Dilip N Shraf [2007 (5) TMI 198 - SUPREME COURT] that “the quasicriminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice. The alleged notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 31.12.10 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of ₹ 16,00,000/- imposed u/s 271(1)(c) on this ground itself. - Decided in favour of assessee
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Customs
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2018 (12) TMI 1122
Benefit of exemption - import of specified goods - Deployment of road Construction projects - N/N. 21/2002-Cus dated 1st March 2002 - import of hydraulically operated self-propelled piling rig Model No. HR-80 - appellant did not comply with the timelines insisted upon in the adjudication proceedings - Held that:- The utilisation for some work on behalf of M/s Delhi Metro Rail Corporation, indisputably not among the statutory instruments enumerated in the exemption notification, as well as other bodies has been held to be breach of the undertaking. An averment of an official of the said Corporation has been relied upon to exclude the possibility of deployment in road contracts. As for as the other deployments are concerned, the adjudicating authority could not be expected to arrive at a conclusion in the absence of material furnished by the noticee. The appellant, admittedly, did not comply with the timelines insisted upon in the adjudication proceedings. The reasons for such failure were placed on record before the original authority. The deployment on any road construction project would suffice for continuing entitlement to the exemption, the object of utilisation on the different projects must be examined - the matter is remanded back to the original authority before whom the appellant shall produce details of deployment and that authority shall cause the veracity to be ascertained before rendering a fresh adjudication order - appeal allowed by way of remand.
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2018 (12) TMI 1121
Mis-declaration of imported goods - melting steel scrap or not - enhancement of value based on NIDB Data - Held that:- The goods imported have been agreed upon between the appellant and the seller as that of being melting scrap. All the requisite documents reveal the goods as that of being melting scrap. An identical question was considered by this Bench in the case of Vardhman Sales Agency [2018 (3) TMI 563 - CESTAT ALLAHABAD], where it was observed that as long as the goods stand described in the import documents as scrap, there can be no charge for the mis-declaration based upon the visual examination of the goods and the findings of under-valuation arrived on the said ground itself cannot be upheld. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1120
Cancellation of DEPB scrips/DFIA licences on the part of transferees - N/N. 89/2005-Cus. and 40/2006-Cus. - Held that:- Tribunal in the case of Sumit Wool Processors and others vs. CC(Import)/(Export) [2015 (10) TMI 329 - CESTAT MUMBAI], has decided the issue in favor of the appellants, holding that the transferees in the cases had no knowledge of misrepresentation by the exporters. Confiscation of the goods imported by the appellants who are transferees of the licences/scrips does not arise - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (12) TMI 1123
Oppression and mismanagement - Allotment of share capital, alteration and rectification of the register of members wrongfully - Permanent injunction - allotment of shares in favour of the Defendant Nos.5 to 9 as null and void - whether the issues of further share capital, was contrary to the scheme provided under Section 62 of the 2013 Act - Jurisdiction of NCLT - Held that:- Such issuance of share capital to the detriment of an existing member is prejudicial to the said member, as also the interest of the company. Moreover, under Section 242(2) of the 2013 Act, restrictions can be imposed on the transfer or allotment of shares and passing of such orders are within the domain of the NCLT. It is clear in the facts of this case that involving issues relating to allotment of share capital, alteration and rectification of the register of members, the NCLT is `empowered to decide’ –leading to the conclusion that this Court has no jurisdiction. The Legislative scheme having been changed, with the amendments which have brought about and for all the reasons stated herein above, this Court holds that the present suit is liable to be rejected leaving the Plaintiff to avail its remedies, in accordance with law before the NCLT. Yet another reason for holding that this Court would have no jurisdiction is fact that the matter is also pending before the CLB (now transferred to the NCLT at the instance of one of the directors). The interim order passed by this Court has been in operation since 12th March, 2014. The said interim order would, continue for a further period of 4 weeks in order to enable the Plaintiff to approach the NCLT. The plaint is rejected with liberty as provided above
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Insolvency & Bankruptcy
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2018 (12) TMI 1126
Corporate Insolvency Resolution Process - whether the Adjudicating Authority can entertain or reject an application under Section 7 of the ‘I&B Code’ on the ground of “usurious and extortionate penal interest”? - Held that:- From the ‘I&B Code’, it will be evident that the ‘Corporate Insolvency Resolution Process’ is not a litigation and are not decided by Court of Law. Now, the ‘Adjudicating Authority’ deals with the matter of insolvency, which in its first stage is required to take steps for ‘resolution’ of the ‘Corporate Debtor’. Therefore, the Adjudicating Authority being not a Court of law and as the Adjudicating Authority do not decide a money claim or suit, it cannot exercise any of the power vested under Sections 3 or 4 of the ‘Usurious Loans Act, 1918’. ‘The Presidency- Towns Insolvency Act, 1909’ having repealed, and there being a bar of jurisdiction under Section 231 of the ‘I&B Code’ as no civil court have jurisdiction in respect of any matter in which the Adjudicating Authority is empowered to decide under the Code, we hold that the provisions of Sections 3 & 4 of the ‘Usurious Loans Act, 1918’ are not applicable to any of the proceeding under Section 7 or 9 of the ‘I&B Code’. Further, as initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 or 9 do not amount to recovery proceedings, the question of deciding the claim, which may include the interest by the Adjudicating Authority does not arise for the purpose of triggering the ‘Corporate Insolvency Resolution Process’. If the application is complete and the Adjudicating Authority is satisfied that there is a debt due to the ‘Financial Creditor’ and there is a default on the part of the ‘Corporate Debtor’, it has no other option but to admit the application in absence of any other infirmity. For the reasons aforesaid, no interference is called for against the order(s) of admission which are under challenge
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2018 (12) TMI 1125
Corporate Insolvency Resolution Process - non conducting the business due to certain RBI Circular dated March 13, 2018 - Whether the Corporate Applicant succeeds in proving default in payment of debt due to its creditors? - Held that:- Annexure A-12 reflects the demand notices raised by the Income Tax Authorities. Truly, execution petitions are also seen filed by the operational creditors on the strength of an award passed in the year 2013 and it is pending for consideration before various courts. So, there is default in regards operational debt due to the statutory authorities and operational creditors. However, the operational creditors objected the application alleging that corporate applicant has filed this application to defraud all its creditors and to frustrate the orders passed by the Hon’ble Supreme Court of India and the Hon’ble High Court at Calcutta. Whether the application filed, is to defraud its creditors or not will be dealt with while answering point No. 2. The default in repayment of operational debt being proved, I can come to a conclusion that the occurrence of default as far as operational debt is concerned, stands proved in this case. Application with mala fide intention - Whether the Corporate Applicant has filed the application with malicious intent and to defraud the creditors? - Corporate Applicant has changed the name of the company and its registered office - Held that:- Applicant has changed its name about three days prior to the institution of this Application; that the Corporate Applicant changed the registered address of the applicant before one day of the date of institution of this Application; that the applicant has suppressed the name change in the Form 6 and in the affidavit filed along with the application; that the Applicant failed in proving occurrence of default as defined under Section 10(1) of the code; that no materials brought out to prove existence of default as provided under section 3(12) of the code; that Annexure A-11, a letter of information obtained by the applicant three days prior to the institution of this Application for establishing that there was no repayment of the amount due; that none of the financial creditors of the Corporate Applicant has issued demand notice demanding repayment of the loan amount or any part of the amount allegedly due to them or recalled the loan before the date of filing the application; that none of the financial creditors declared the debt as NPA; that the financial statements produced on the side of the corporate applicant prove that the company was running in profit, and that there are pending litigations in between Operational Creditors, Financial Creditor and shareholders for recovery of money, are all circumstances which lead to a conclusion that the Corporate Applicant came forward/rushed to this Tribunal to misuse the chance of declaring moratorium so as to stay all the litigation for money recovery pending against it. The above said circumstances accordingly are sufficient to come to a conclusion that the corporate applicant filed the application with mala fide intention and with ulterior motive for purpose other than for the resolution. The two points are answered accordingly. Non-compliance of Sub-clause(c) to Section 10 (3) - Whether the application is maintainable for want of production of special resolution as per Section 10(3)(c) of the Code? - Held that:- To sum up the proposition that was held in BK Educational Services (P.) Ltd. (2018 (10) TMI 777 - SUPREME COURT), that procedural law should apply retrospectively, that sub-clause(c) of the Code inserted to Section 10(3) can be construed as a procedural law by applying the proposition laid down in Thirumalai Chemicals Ltd.’s case (2011 (4) TMI 489 - SUPREME COURT OF INDIA), it appears to me that sub-clause(c) is procedural and should apply retrospectively. Upon applying it as retrospectively, have no hesitation in holding that non-compliance of Sub-clause(c) to Section 10 (3) of the Code proves that one among the essential ingredients to be proved on the side of the corporate applicant has not been complied by the applicant.
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2018 (12) TMI 1124
Corporate insolvency proceedings - decision taken by the Lenders for removing the Resolution Professional at the expiry of the CIRP - Held that:- If the provisions of Section 33 of the I&B Code, 2016 are taken into consideration, the prayer can only be made for passing an Order for liquidation of the Corporate Debtor viz., M/s. Oceanic Tropical Fruits Pvt. Ltd. The Applicants, who are the lenders, have prayed to replace the Resolution Professional under the abovestated provisions of law in terms of meeting held on 03.09.2018 among SBI, CBI and ICICI Bank Ltd., having 100% of voting share with a further direction to him to hand over income and expenditure details incurred during CIRP period as duly approved by CoCs and consequently appoint Mr. P.R. Raman (RP) after excluding the time period consumed by the 1st Respondent (RP) in order to complete CIR Process within the time frame limit as mandated under the provision of I&B Code, 2016 and pass such further or other orders as deemed fit and proper and thus render justice. However, this Application has been filed after expiry of the maximum period of CIRP as provided under Section 12 of the I&B Code, 2016, which is not falling within the purview of the provisions of the Code, and is not maintainable at the instance of the lenders. Applicants have filed the instant Application at the fag end of the CIR Process to replace the Resolution Professional who has already acquainted with the details of the business ventures, assets and other transactions of the Corporate Debtor. Therefore, the reasons given by the lenders for replacing the Resolution Professional and the procedure followed is not known to law. Moreover, it has also been noted by this Authority that the lenders have convened the meeting on 03.09.2018, which was not conducted in accordance with the provisions of the I&B Code, 2016. Conducting of the meetings of the CoCs is the responsibility of the Resolution Professional as and when required or deemed fit or at the request of any the CoCs members or any mandatory meeting warranted by the I&B Cade, 2016 and the Resolution Professional shall act as Chairman of such meetings. However, no such request was made by the CoCs to the Resolution Professional for conducting the meeting on 03.09.2018. Therefore, the same cannot be said to be the meeting of the CoCs as envisaged by the provisions of I & B Code, 2016. Thus, the decision taken by the Lenders for removing the Resolution Professional at the expiry of the CIRP is not in accordance with the law and the same is illegal and arbitrary action of the lenders and deserves to be set aside. Therefore, the resolution passed by the lenders on 03.09.2018 for replacing RP is declared null and void and set aside. Otherwise also, after the expiry of the CIRP period such a demand for replacing the Resolution Professional appears to be an afterthought and without backing of any of the provisions of the I&B Code, 2016. In the circumstances, the Application filed by the lenders stands dismissed.
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Service Tax
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2018 (12) TMI 1127
Classification of services - Business Auxiliary services or otherwise - incentive received from M/s. LKP Financial Services - Held that:- Business Auxiliary Service does not cover the aforesaid activity of Money Changing Facility, while Banking Other Financial Services specifically covers Money Changing Business , that too w.e.f 16.05.2008, Nomenclating the very same under Business Auxiliary Service for the purpose of charging service tax is therefore not proper and legal - the demand on account of foreign exchange of incentives from M/s. LKP Financial Services is liable to be set aside irrespective the commission received by appellant from M/s LKP for providing premises to render banking financial services is taxable provided it had been so demanded - demand set aside. Demand of service tax - Mandap keeper services - non-payment of service tax on the invoices where the tea/ snacks/ breakfast was served - Held that:- In the present case, the appellant hotel being registered as the Mandap keeper is providing the catering service. The invoices so raised by him show that the same were inclusive of charges of catering services. It is clear from the language of the notification that the nature of menu is not the criteria for availing the exemption but the menu served has to be substantial and satisfying - demand set aside. Taxability - convention services - Held that:- While holding senior management meet, dealer meet, customer meet, medical conference etc the appellants were providing the services and that of convention services and not the Mandap keeper services. The fact that those meetings continued till late hours and liquor in addition was served there does not alter the fact that these still were the meetings for the specific group of people for the professional/ official objective and were not open to general public - The findings of the Commissioner are therefore opine incorrect to this effect - However, since the liability while treating them as Mandap keeper service had admittedly been already, discharged, the differential, if any, shall only be payable under this head order accordingly is set aside to this extent. Taxability - 10% services charge/tips in the bills - Held that:- Section (65)67 defines Mandap keeper as a person who allows temporary occupation of a Mandap for a consideration for organizing any official, social or business function. For such services all such charges as are related to the use of a Mandap by a Mandap keeper are to be included towards gross amount and are chargeable to service tax as per the above said provisions - The appellant is admittedly providing the Mandap keeper services. Since 10 % of the service charge/ tip is also one of the charges of services included essentially towards providing the Mandap Keeper Service the same has to be included in the gross amount - demand upheld. Taxability - services received from outside India - Held that:- Undisputedly, for the period 2003-04 and 2006-07, the amounts were remitted on account of services received on account of overseas travel agents (commission), advertisement sales paid to foreign parties including fees paid to international travel agent group for which participation of hotel is mandatory for securing business, payments made for participation in Frequent Flyer Programmes made outside India, Membership outside India i.e. all the services provided and consumed outside India. These servies came into tax net only w.e.f. 18.04.2006 - demand on this count has correctly been dropped by the Ld. Commissioner but only for the period prior 18.04.2006. Time limit of issuing SCN - Held that:- It is apparent from record that the appellant had not paid the, whatever tax, by the prescribed date. They had not disclosed the amount paid towards these services till the date the audit was conducted. There is no communication on record seeking clarification on account of pleaded bonafide confession - the department was entitled to invoke the extended period of limitation. Appeal allowed in part.
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2018 (12) TMI 1118
Refund claim of service tax - validity of period of limitation of 6 months - exemption grated with retrospective effect - vires of Section 103 of the Finance Act, 1994 - Construction of Port Services - N/N. 25/2012ST dated 20.06.2012. Held that:- Section 103 was introduced in the Finance Act, 1994 with a specific purpose of granting exemption from service tax of certain services with retrospective effect. This covers the period between 01.04.2015 to 29.02.2016. Since this exemption was granted with retrospective effect, the question of refund would arise. It is in this context, subsection (2) of Section 103 envisages refund of the tax already collected and deposited. Subsection (3) however, provides a limitation of making refund application and as noted starts with nonobstinate clause. The period of limitation of six months for making the refund application is, therefore, notwithstanding anything contained in the chapter, in which the said provision is contained. Section 103 of the Act is thus a complete mechanism for recognition of exemption, refund of the tax so exempted with retrospective effect and the mechanism for claiming such refund. Such limitation period cannot be interpreted as merely directory, particularly when subsection (3) in addition to providing the period of limitation, overrides any other provisions of the chapter, which may be to the contrary. Courts have often hold that period of limitation for claiming refund is mandatory - Further, the contention that subsection (3) of Section 103 retains the period of limitation of one year prescribed in the Excise Act and is aimed to protect such refund application which cover the period beyond such period, cannot be accepted. Petition disposed off.
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2018 (12) TMI 1117
Composite works contract - liability of service tax - Jurisdiction - Held that:- One of the four works contract entered into by the petitioner between the period September 10, 2004 to June 15, 2005 being exigible to Service Tax on the ground that, they are indivisible works contract, the assumption of jurisdiction by the authorities is without any basis. The impugned show-cause-cum-demand notice dated September 7, 2009 is quashed - appeal disposed off.
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2018 (12) TMI 1116
CENVAT Credit - Construction of the Hotel Building - Held that:- Issue decided in appellant own case M/S LEMON TREE HOTEL (CYBER HILLS DEVELOPERS PVT. LTD.) , M/S FLEUR HOTELS PVT. LTD. VERSUS CC, & CE, HYDERABAD-IV [2017 (7) TMI 799 - CESTAT HYDERABAD], where it was held that Input services includes the services used in relation to settingup, modernization, renovation of premises of provider of output services - the credit qua construction of hotel building of appellant allowed. CENVAT Credit - commonly used input services - security services - Internet Services - Held that:- The appellants were rendering taxable services of cab operators convention service, Banking and Financial Service, Business Auxiliary Service, Internet café, restaurant service and accommodation services. The input service credit was availed by the appellant on the construction services which were used for setting up of the premises from where the output services were rendered by the appellant and on the internet café and security services for the same premises from where the output services were to be rendered by the appellant - in view of SRule 6 (5) thereof no question of denial and reversal of credit, therefore, at all arises - credit allowed. Interest - Penalty - Held that:- Demand of interest as well as penalty set aside. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1115
Refund claim - time limitation - applicability of Section 11B of Central Exercise Act - Held that:- Hon’ble Apex Court in the case of Mafatlal Industries Limited Vs. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA] as has been relied upon by the Larger Bench of this Tribunal in the case Veer Overseas Ltd. Vs. Commissioner of Central Excise, Panchkula [2018 (4) TMI 910 - CESTAT CHANDIGARH] wherein it was held that for entertaining the refund claim of the amount paid by mistake, the time limit prescribed under Section 11B of Central Excise Act, 1944 is not applicable. Whether the refund claim in question is within one year of the time limit as prescribed under 11B? - Held that:- The appellant was not supposed to file the refund claim during the pendency of the Appeal. It stands clear that duty became finally refundable to the appellant only after the decision of the CESTAT and as per above said sub clause (ec) of Clause B, the claim could have been filed within one year form the date of this Tribunal Order i.e. till October 2017. The claim has been filed in March 2017. The same is therefore held to be well within the period of limitation. Refund claim also rejected on the ground of non-submission of documents - Held that:- The service tax to the tune of ₹ 1,68,647/- was pre-deposited and the service tax to the tune of ₹ 3,05,124/- which was not initially admitted by the adjudicating authority but was subsequently allowed by Commissioner(Appeals). Thus, no more evidence, at all is required about the proof of payment of service tax as claimed vide the impugned refund claim - rejection on this ground is also not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1114
Valuation - abatement - commercial or industrial construction service - residential portion of the complex - Held that:- It is clear from the proceedings that the nature of ownership of the land is not relevant and that taxability arises from any kind of agreement which does not involve outright sale that, admittedly, the present agreement is not. It, however, remains to be ascertained if the claim of the appellant to have completed the process of handing over before the date of applicability of the tax is allowable. The matter remitted back to the original authority to verify the claims of the appellant - appeal allowed by way of remand.
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2018 (12) TMI 1113
Classification of services - Business Auxiliary Service or not - rendering activities of collection of instalment / loan from the customers of the bank - time limitation - Held that:- Undisputedly appellants are acting in the capacity of collecting agents for ICICI Bank and they collect the dues payable by customers to such Banks on behalf of the Banks - As per the agreement dated 28.1.2005, the appellant has been appointed as mere collection agent. The agreement itself is named as ‘Collection Agreement’. The scope of the work is to act as collection agents of ICICI. Such activity would definitely fall under ‘Recovery Agent Service’. The demand under BAS for the period after 1.5.2006 therefore cannot sustain, the demand of service tax under BAS after 1.5.2006 is therefore set aside. Time Limitation - Held that:- Though the department alleges that the appellant is guilty of suppression of facts, there is no evidence brought forth as to what is the positive act committed on the part of the appellant. The various documents show that the appellants have furnished the entire documents as requested by the department. In fact, the demand has been quantified basing upon the document produced by the appellant. There is no case for the department that appellant had been maintaining parallel records so as to evade payment of service tax - the department has failed to establish suppression of facts with intent to evade payment of service tax so as to invoke extended period. The appellant therefore succeeds on the ground of limitation. Demand of service tax - reimbursable expenses - Held that:- The appellant has stated that these were expenses incurred by the appellant for obtaining demand drafts, courier expenses, travelling expenses etc. These are actual expenses incurred by the appellant which would fall under reimbursable expense - the demand on reimbursable expense cannot sustain and requires to be set aside. The impugned orders are modified to the extent of setting aside the demands on BAS prior to 1.5.2006 on the ground of being time-barred - After 1.5.2006, the demand is set aside since the activity does not fall under BAS - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1112
Refund of service tax paid wrongly under the category of renting of immovable property - assesse claimed that the leasing of club (a business) does not fall in the meaning of word ‘immovable property’ - the appellant has been running the club by way of Joint Venture with AMPL, on principle to principle basis - revenue sharing - Revenue contended that, the club is a multiple use building and the service provided by the club were available only to members and their guests. Held that:- In this agreement from the Revenue Sharing Formula and the mutual covenants as agreed between the parties, it is crystal clear that the appellant and AMPL intended to do the business of running of club on principle to principle basis. We further hold that the subsequent modification of the Revenue Sharing Clause between the parties does not change the colour and reduce the arrangement between he parties as that of landlord and tenant. In principle, the appellant has not delivered the possession of club to AMPL by way of tenancy but has only given the right to manage and operate the club for their mutual benefit, on principle to principle basis. Refund claim - time limitation - Held that:- there is no application of Section 11 B of the Central Excise Act in grant of refund, in the facts of the present case following the precedent ruling in the case of Union of India Vs. ITC Ltd. – [1993 (7) TMI 75 - SUPREME COURT OF INDIA]. A tax wrongly realized or paid on in excess of what is permissible in law, is a realization made outside the provisions of the Act. Such amount cannot be retained by Revenue, being in conflict with Article 265 of the Constitution. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1111
Extended period of limitation - penalty - Rate of tax - commercial coaching and training service - Contention of the department is that the appellant have collected advance amount towards coaching and training service whereas in the middle of the course session the service tax rate was revised from 8% to 10.2% - Held that:- The issue involved is interpretation of law that whether the service tax rate is applicable on the date of receipt of advance or on the date of providing the services - the issue being of interpretation of law, longer period of demand cannot be invoked, hence the demand for the extended period was set aside. The demand for extended period and corresponding penalty will not sustain on limitation itself - appeal allowed in part.
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Central Excise
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2018 (12) TMI 1110
Jurisdiction to raise demand u/s 11A central excise - extended period of limitation - petitioner availed the benefit of the Duty Free Credit Entitlement (DFCE) scheme. - the petitioner claimed to be a manufacturer and obtained registration for the same, the adjudicating authority found the petitioner to be a trader - It is the claim of the petitioner that, No liability can be fastened upon the petitioner under the provisions of the Act 1944. - Held that:- The department cannot be faulted when it invoked provisions of Section 11A(4)(d) of the Act of 1944 in issuing the impugned show-cause notice and adjudicating thereon. There is no substance in the contention with regard to the limitation as put forward by the petitioner. Therefore, the authorities cannot be said to be acting without jurisdiction on the ground that, the claim made under the impugned show-cause notice stands barred by limitation as prescribed under the Act of 1944. The proceedings are within the period of limitation under the provisions of Section 11A(4) of the Act of 1944. There is no evidence placed on record to suggest otherwise - Petition dismissed.
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2018 (12) TMI 1109
Valuation - Compounded levy scheme - goods manufactured but not cleared from the factory and lying as opening stock at the time of introduction of compounded levy scheme - whether chargeable to tax on the basis of rates prevalent prior to introduction of compounded levy scheme or the said clearances would be adjusted against the duty paid on the capacity determined under the compounded levy scheme? Held that:- The manner of collection was changed from ad-valorem duty on each clearance under Section 3 of Central Excise Act, 1944 to compounded levy under Section 3A of Central Excise Act. The charges were enforced by issue of Notification No. 29/2008-CE (NT) dated 01.07.2008. Thus there was no new levy introduced but there were only changes in the manner of collection. The issue decided in the case of WALLACE FLOUR MILLS COMPANY LTD. VERSUS COLLECTOR OF C. EX. [1989 (9) TMI 106 - SUPREME COURT OF INDIA], where it was held that Even though the taxable event is the manufacture or the production of an excisable article, the duty can be levied and collected at a later date for administrative convenience - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1108
Clandestine removal - MODVAT/CENVAT Credit - MS ingots - Kar Vivad Samadhan Scheme (KVSS) - Department has mainly relied upon the documents alleged to be recovered from the transporter Shri Rajarathina Transporters - Held that:- The department has not been able to establish the reason for applying a different formula for demanding duty for the overlapping period. It is also mentioned that when it is already concluded that the department has failed to establish procurement of unaccounted raw materials and when there is no discrepancy with regard to the stock of raw materials and finished products, noted by the department, the allegation of clandestine clearance of finished products of such huge quantity has to be supported by reliable and cogent evidence which is not present. The physical verification of stock, no discrepancy with regard to raw materials has been noted by the department. Even though statements of various traders were taken, the stock as recorded in the RG-I register and that was lying in the factory did not show any difference. The other evidence relied is with regard to the cash deposits made in the account of Shri Prem Kumar, who is the director of the company. The amounts in his Karur Vysya Bank account has been explained by him stating that he had other business of construction activities and amounts are with regard to such business. The department has rejected and not accepted this explanation. No verification has been done in this regard. Merely because there are certain cash deposits in the account of the director of the company, it cannot be concluded that these are amounts received from sale of clandestinely removed finished products - thus, the department has failed to establish the allegation that the appellant availed fraudulent MODVAT credit to the tune of ₹ 18,93,298/-. The demand on this count cannot sustain and therefore requires to be set aside - The department has not been able to establish clandestine clearance of finished products also and the demand on this count is also set aside. The department has not been able to establish the clandestine removal of goods or wrongful availment of MODVAT credit - the charges against other appellants also cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1107
Valuation - stock transfers to depots at the prices prevalent on such date at the depots - goods are partly sold at the factory gate and partly stock transferred to depots - Section 4 read with Rule 4 of the Central Excise Valuation Rules, 1975 - Revenue has taken the view that duty is required to be paid only at the highest such price charged to individual customer. Held that:- In the present case, there is a price charged on any given date from individual buyers, but at the same time at the same date, the lower prices are charged to different customers with whom the appellant has contracted prices, keeping in view the volume of business, promptness of payment etc. It appears to us that each contract price can be considered as applicable to a particular class of buyers. A perusal of the invoices issued at the factory gate in respect of goods meant for supply at contracted prices reveals that, the invoice issued for stock transfer invariably indicates the name of the customer and the contract price. On subsequent sale at the depot, the depot invoice indicates the very same price. In view of the above we are of the view that the appellant has discharged duty for such goods transferred to depot appropriately. Appeal dismissed - decided against Revenue.
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2018 (12) TMI 1106
Clandestine manufcature and removal - Zarda - findings are based upon the result of investigations made by DGCEI during the course of search in the appellant’s factory premises, residence as also in the premises of one of the distributor of the appellant - Held that:- It is a fact on record that during the search of the factory premises, no discrepancies were found in the stock of either the raw material or the final product of the appellant. Further the search of the residential premises of the Director resulted in recovery of one invoice of M/s Sanjay & Co. being Invoice No.155 dated 20.08.2011 indicating sale of 2,600 kg of aromatic material. Further, a meager quantity of the final product was also recovered from the distributor’s premises. The Revenue’s entire case is based upon the recovery of the said excess material from the business premises of M/s Shantilal J. Sopariwala, which the appellant have admitted having been cleared without payment of duty either as samples or as replacements for the damaged goods and have already discharged duty of ₹ 34 thousand (approx.) on the same. Whether such recovery of small quantity of appellant’s final product from the business premises of their distributor, lead to allegation of huge quantity of clandestine removal by appellant, thus leading to confirmation of demand to the extent of around ₹ 4.6 crores? - Held that:- It is well established law that allegations of clandestine removal are required to be made on the production of sufficient and positive evidences, thus leading confidence to the Revenue’s stand. Even for applying the theory of preponderance of proportionality there has to be evidences on record so as to inspire confidence in the Revenue’s theory of clandestine removal. The said findings cannot be arrived at on the basis of assumptions & presumptions. However, merely because some excess quantity of final product was recovered from the appellant’s distributor premises will not lead to the inevitable conclusion of removal of 1,39,307.14 Kg of the appellants final product zarda in a clandestine manner - Even, as per the settled law, the goods found in the open market are to be considered as duty paid unless there is sufficient evidences to prove to the contrary. Revenue has not referred to any evidence to show that the said goods were cleared in a clandestine manner. However, as the appellant has not contested duty involved in the said excesses, the same is upheld. There is virtually no evidence of the identification of the buyers to whom the said goods have been sold. Further the Revenue has not made any efforts to identify the transporters through whom the said goods were cleared. The value of such clandestinely cleared goods is huge and their needs to be some evidences of receipt of consideration of the same from the buyers. There is nothing on the record to reflect upon the receipt of any consideration. The clandestine removal findings cannot be solely based upon either the statements or recovery of documents issued by third party and there has to be clinching evidences on record to establish such removals. No doubt that such evidences cannot be expected to be upto last degree but the same should be in the nature of evidence so as to inspire confidence in the Revenue’s allegations and to tilt the weight of the evidences in favour of the Revenue. In the present case, having already observed that the invoice of M/s Sanjay & Co. showing doubtful removal of one of the raw material cannot be held to be a sufficient evidence so as to inevitably lead to the findings of clandestine removal in the absence of any other evidences corroborating the above stand of the Revenue, the impugned order is unsustainable. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1105
CENVAT Credit - input services - outdoor catering services - club membership services - medical health services - Held that:- As far as outdoor catering services is concerned, the services have been obtained by the appellant company for all its employees in general, while holding an event for the employee of the company as a whole. In that scenario, the term ‘personal use’ as in the above definition cannot be attributed to the given circumstances and cenvat credit cannot be denied on the outdoor services - In the present case also admittedly, the cost of catering services has been born by the appellant company and has not been recovered from the employees. Such service is therefore held to be an input service for which the appellant was entitled to take the credit. Club membership fees - Held that:- The adjudicating authorities below while denying the cenvat credit thereupon have held that there is no evidence produced by the appellant to prove any nexus of the services availed by the assessee to the business activity of the appellants. No doubt, appellant was supposed to produce such evidence as may prove as to who actually paid the said fee. As it will be the deciding criteria as to whether the fee was paid for the company as a whole under any of its policy for enhancing employee efficiency or those have been born by the individual employee for the sake of their own entertainment. Apparently there is no such evidence on record - impugned order upheld - credit rightly denied. Health check up of employees - Held that:- It cannot be ruled out that the good health of employee will make them readily available for rendering the activities related to business. The appellants are in telecommunication business. Their employees are required to function for long hours and even at odd hours. The health of an employee may affect the activity of the appellants business - the expenditure incurred by the appellant company for getting medical check-up of their employees, though individually, is definitely an input service - credit allowed. CENVAT Credit - capital goods - desktop - chairs - fire extinguishers - Held that:- Any goods which are used for providing output service can be classified as the capital goods. Appellant admittedly are providing telecommunication services. Admittedly, the services are provided through various servers. The individual employee to remain connected to those servers need computer/desk-top. Therefore these are opined as an indispensible tool used by the employees of the appellant company for providing the output services of telecommunications - credit allowed. It is only in case of factory of a manufacturer of final product that any equipment or appliances used in his office are excluded from the definition of capital goods. The appellant herein admittedly is not a factory. His activity is covered under Section 2 (a) (A) (2) of CCR, 2004 and as such the credit cannot be denied merely holding these articles to technically be called as equipment or appliances. Keeping in view the same even the chairs used in the office of a telecommunication company are the capital goods. Fire extinguishers - Held that:- Fire extinguishers are qualified under Chapter 84. Hence, are the capital goods in view of Rule 2 (A) (i) of CCR. Otherwise also fire extinguishers are the statutory mandate for any premise to be sanctioned for its use - credit allowed. Denial of cenvat credit for Membership Fee of the Clubs upheld - other credits allowed - appeal allowed in part.
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2018 (12) TMI 1104
CENVAT Credit - excisable or exempt goods? - Whether the iron ore fines as cleared by the appellants can be considered as a separate excisable but exempted commodity? - Held that:- The admitted procedure adopted by the appellant in manufacturing his final product i.e. sponge iron is that the appellant procures iron ore as the input for manufacturing sponge iron. The said iron ore lumps of different sizes are first crushed and are then segregated by screening. It is thereafter that requisite sized iron ore /ore lump is feeded in the sponge iron klin. In the aforesaid process of segregation that the iron ore fines are inevitably generated. Thus these fines, cannot be considered as the result of the manufacturing activity of the appellant, since no manufacturing activity is involved for emergence of the same out of iron ore by the appellant. The Department has brought nothing on record to show that the iron ore fines can be considered as exempted goods. Apparently and admittedly, there is no Notification of the Revenue granting exemption to this product. Thus, the embargo created in Rule 6 (3) (b) of CCR will not apply for removal of iron ore fines from the appellant’s factory. Confirmation of demand by Commissioner (Appeals) is therefore, held to be not proper and justified. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1103
Clandestine removal - shortage of stock - pig iron - stock taking conducted by the Internal Stock Verification Department - CBEC Circular No.52/79 CX.6 dated 26.10.1979 - whether the shortages noticed in Pig iron during the annual stock verification are to be charged to Central Excise duty? Held that:- It has been pointed out that the differences have arisen on account of different yardsticks adopted for accounting quantities. The criterion adopted for measuring the quantity of Pig iron at the stage of final product, is on the basis of actual weighment as appearing in Railway receipts. However, the stock verification quantities are estimated on volumetric basis. The total quantity of such material produced during the disputed period is also extremely high and is of the order of 19,53,003 MT. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1102
Default in making payment of duty - vires of Rule 8 (3A) of the CER, 2004 - denial of utilization of cenvat credit account for payment of duty - Held that:- The provision of Rule 8 (3A) of CER, 2004 has been declared ultra virus by the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. Vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] and the said order has been stayed by the Hon’ble Apex Court, but, considering the said situation this Tribunal in the case of R.B. Industries vs. CCE-Delhi-IV [2017 (10) TMI 611 - CESTAT CHANDIGARH] has held that the demand are not sustainable. The provision of Rule 8 (3A) of CER, 2002 has been declared ultra virus, therefore, the proceedings against the appellant are not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1101
Clandestine removal - allegation based upon recovery of the alleged incriminating documents either from the appellant’s factory or from the common godown located at Greater Kailash or their Head Office, read with the statements recorded during investigations - opportunity of cross-examination denied - onus of proof - Held that:- Though the Adjudicating Authority has discussed each and every document separately but has confirmed the demands by observing that once the said documents are seized by the Revenue, then it is the appellant’s turn to rebut the same by production of sufficient evidences. Though, the appellant has given explanation in respect of each and every document but the Adjudicating Authority has observed that they have not produced any evidence on record to show that the entries in the said registers which are private documents were not entries of clandestinely removed goods. It is the Department, who is alleging clandestine removal on the part of the manufacturer and as such the onus to prove so lies upon them. Recovery of the registers/documents/lose papers maintained in the assessee’s factory for internal movement of the goods from one section to another, by itself, are not sufficient to establish the clandestine activities - further, Revenue has made no further efforts to find out the source of the procurement of raw material, the actual production in the appellant’s factory or transportation of the same or the identity of the buyers and the cash receipt of the consideration for the goods in question. In the absence of these evidences, it is not justifiable to uphold the clandestine removal charges. Benefit of exemption - Basil and Parsley soap with the aid of power - Held that:- Inasmuch as the appellant have not rebutted the use of power at various stages of manufacture of the said soaps, they were not entitled to exemption and were required to pay duty. Time limitation - Held that:- The use of power was found by the Revenue only subsequently, during the visit of the factory and subsequent investigations. As such filing of declarations, by itself, when the facts have been mis-stated in said declarations cannot come to the aid of the appellant justifying to limit the demand to the normal period of time. Decided partly in favor of assessee.
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2018 (12) TMI 1100
Area Based Exemption - N/N. 50/2003-CE dated 10.06.2003 - appellant purchased brake shoes and batteries in finished condition from the manufacturers and was clearing them from their factory after doing fresh packing - Held that:- Revenue has not rebutted the fact that the said machines were purchased by the assessee under the cover of invoices mentioned in the order of Commissioner (Appeals). There is no evidence produced by the Revenue rebutting above finding of fact - appeal dismissed - decided against Revenue.
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2018 (12) TMI 1099
CENVAT Credit - input services - Renting of immovable property services - Work contract service construction service for repair and maintenance - Air Travel agent service - Mandap Keeper service - Club or association service - Courier Service - Held that:- In this Tribunal’s Order M/S UNIQUE PHARMACEUTICALS LABORATORIES VERSUS C.C.E. & S.T., - VADODARA-II [2018 (12) TMI 726 - CESTAT AHMEDABAD] cenvat credit in respect of the same services in the appellant’s own case has been allowed - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1098
CENVAT Credit - service tax paid belatedly - reverse charge mechanism - Rule 9(1)(bb) of Cenvat Credit Rule, 2004 - whether the appellant is entitled for Cenvat Credit in respect of Service Tax paid belatedly on the services received from abroad under Reverse Charge Mechanism? Held that:- As per Rule 9(1)(bb) it is observed that the credit can be denied only if the short payment or non-payment for the reason of fraud or collusion or willful mis statement or suppression of fact or contravention of any of the provisions of the finance Act or Rules made there under with intent to evade payment of Service Tax - From reading of above Section 73 (4A) it is seen that it starts with the terms “not with-standing anything contained under 73 (4A) which deals with situation whether there is a fraud or collusion or willful mis-statement or suppression of fact etc, therefore, when the appellant have availed Section 73 (4A) and the case of non-payment of Service Tax stood concluded by making payment of Service Tax along with interest and 15% penalty, it cannot be said that there is suppression of fact on the part of the appellant. When there is no adjudication, whether there is fraud or collusion or willful mis statement or suppression of fact the same is not established, therefore, after making the payment under Section 73 (4A), the case stand concluded, there cannot be charge of fraud or collusion or willful mis statement or suppression of fact etc. Accordingly, credit on that amount cannot be denied. The denial of Cenvat Credit by the lower authority is not legal and proper - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1097
Rectification of Mistake - Tribunal dismissed the appeal as non-maintainable as the issue involved is of rebate of sugar cess - Held that:- The sugar cess is a duty of excise, therefore, the matter relates to rebate duty including sugar cess is not appealable before this Tribunal - the ROM application is dismissed as there is no error in the order passed by this Tribunal - Revenue’s appeal is dismissed as non-maintainable.
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2018 (12) TMI 1096
Refund of Education Cess and Secondary Higher Education Cess - Area Based Exemption availed - N/N. 39/2001-CE dated 31.07.2001 - Held that:- The issue is no longer res integra as the eligibility of the refund of Education Cess and Secondary Higher Education Cess has been decided in favor of the assessee by the Hon’ble Supreme Court in the SRD Nutrients (P) Ltd. [2017 (11) TMI 655 - SUPREME COURT OF INDIA], where it was held that The appellants were entitled to refund of Education Cess and Higher Education Cess which was paid along with excise duty once the excise duty itself was exempted from levy - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1095
Rectification of mistake - restoration of appeal - applicant asserts that they had not received the notice and therefore, they could not appear for the hearing - Held that:- The Revenue has not disputed the assertion of the applicant that they had not received the notice - In these circumstances, the order is recalled and the appeal restored to its original number, to be listed in due course - Restoration of application allowed.
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2018 (12) TMI 1094
CENVAT Credit - input services - construction services post 01.04.2011 - Held that:- The construction service was received in connection with setting of “Effluent Treatment” plant with the existing factory, however, the fact whether it is for Repair, Renovation, Modernization or for setting of the new plant has not been verified, therefore, for this purpose i.e. construction service is of Repair, Renovation, Modernization or new construction needs to be remanded to the adjudicating authority - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (12) TMI 1093
Condonation of delay in filing appeal - Imposition of penalty - petitioner has paid the tax liability even before issuing the notice of proposal on 09.05.2016 - assessment year 2014-15 - Held that:- Since such Appellate Authority is empowered to entertain the appeal only within a period of 60 days including the condonable period, this Court is inclined to give an indulgence to the petitioner to approach the Appellate Authority and file the appeal so as to enable such authority to decide the merits of the matter in accordance with law - petition disposed off.
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2018 (12) TMI 1092
Validity of assessment order - lack of Jurisdiction - Principles of natural justice - Held that:- On a perusal of the objections given by the assessee dated 24.2.2017, it is clear that the assessee was fully aware as to what is the case they have to meet. Therefore, we are of the view that it cannot be stated that there had been violation of the principles of natural justice. On a reading of the assessment orders dated 28.7.2017, it is found that the Assessing Officer had given reasons, which, in his opinion, would justify his action in adding 25% to the assessee’s reported turnover - the assessee cannot contend that there had been violation of the principles of natural justice. Jurisdiction - Held that:- Undoubtedly, Section 27 of the State Enactment empowers the respondent to revise the assessments. The assessee’s case before us is not questioning the jurisdiction of the respondent under Section 27 of the State Enactment, but as to the manner, in which, he has exercised his jurisdiction and the effect of the assessments, which had attained finality in the State of Andhra Pradesh wherein the assessee’s marketing companies have been assessed and the turnover have been exempted. There is no error in the said impugned common order passed by the learned Single Judge in dismissing the said writ petitions and simultaneously granting liberty to the assessee to file appeals before the First Appellate Authority - appeal dismissed.
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Indian Laws
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2018 (12) TMI 1119
Initiation of disciplinary proceedings on advice of CVC (Central Vigilance Commission) - Held that:- The CVC was discharging its statutory function and exercising authority, inter alia, under section 8(1)(d) of the CVC Act. The process of calling for the views/ comments of the Ministry of Finance on the complaint received against the petitioner was a process undertaken to arrive at a decision whether to inquire into, or case an inquiry or investigation into, the conduct of the petitioner in respect whereof the complaint was made. Section 17 is not the sole repository of, and not the only mechanism by which the CVC exercises its jurisdiction under Section 8 of the Act. There is no question of the issue being re-opened by the competent authority after its closure since, in the first place, there was no closure - Merely because, on consideration of the advice given by the CVC, the competent authority has decided to issue the charge sheet to the petitioner vide memorandum dated 09.08.2012, it does not follow that the competent authority has not taken an independent decision - petition dismissed.
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