Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 24, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
GST
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The composite activity of excavation and moveing / shifting the mineral sand from one place to another, by means of transport by roads/ramps is taxable as "Transport of goods" as principal supply is transportation (GTA)
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Classification of supply - The Applicant’s activity of printing the Bible under the specific orders received from The Gideons International is a supply of service classifiable under SAC 9989 - Since supply is made in India, not qualified for export of services benefits.
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Construction of a private railway siding for carriage of coal and oil fuel to Raghunathpur TPS, as described in the agreement between the Applicant and DVC, is a composite supply of works contract taxable @ 12%
Income Tax
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Penalty u/s 271AAB (1)(c) - admission of additional income while recording the statement u/s 132(4) - the assessee fulfilled all the conditions therein and therefore, penalty shall be @ 10% in terms of clause (a) of sub-section (1) of section 271AAB
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Accrual of Income in India - assessee as a non-resident company which received licence fees in terms of "Membership and Technology Transfer Agreement" - the receipt cannot be characterized as ‘royalty’ and, therefore, the same is outside the purview of taxation in view of India-Canada DTAA.
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Transfer pricing - additions towards interest on inter-company outstanding receivables (arising on account of provision of IT-enabled services) - assessee has not charged any interest - Authorities below are not justified to make addition on inter-company receivables
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Allowable business expenditure - Personal expenditure - Expenses on education of the daughter of one of the directors of the assessee company - nowhere demonstrate that payments were made as part of the sponsoring agency for furtherance of the business interest of the assessee company - Additions confirmed.
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Deduction u/s 10A/ 10AA - The whole contention raised by the assessee was with respect to only the interest income and there was no details furnished of the miscellaneous income earned by the assessee. In absence of nature of the income earned by the assessee, no adjudication on that aspect can be made.
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Penalty u/s 271(1)(c) - loss on sale of shares - change in head of income by AO - merely change of head of income cannot characterize furnishing inaccurate particulars or suppression of facts - No penalty.
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Accrual of income where issue has been referred to arbitration - there was no certainty of realization of the claim of the assessee - such amount of ₹ 26.10 crore did not have any right to receive acquired by the assessee and hence, cannot be held as income chargeable to tax in the hands of the assessee.
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Reopening of assessment - if the Assessing Officer is to reopen the finding rendered in the scrutiny assessment, then it would clearly amount to change of opinion, which is impermissible.
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Assessment u/s 153A - block assessment - Exclusion of Income disclosed under Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) - The grievance of the petitioner stands fully redressed in light of the written instructions - Assessment proceedings are withing the Jurisdiction.
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Seeking refund with interest on the basis of Income Tax Returns (ITR) - Withholding of refund u/s 241A - scrutiny assessment u/s 143(3) is pending - an intimation under Section 143 1) is not to be considered as an assessment. No merit in petitioners argument.
Customs
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Classification of imported goods - whether classified as LCD TVs or classified as LCD Monitors and TV Tuners Boards separately? - Simply claiming the classification as such in their bill of entry does not amount to mis-declaration of the nature of the goods - Demand of duty with interest confirmed, but confiscation and penalty set aside.
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Validity of second SCN - import of restricted item - The first order having being set aside by the Tribunal, on the ground that no specific contravention of the Act had been alleged or established against the appellant, it is difficult to see how the Revenue could sustain an entirely inconsistent order in respect of the second show cause notice.
PMLA
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Offence under Prevention of Money Laundering Act - Attachment of bank account - Even after the property is frozen, the officer has to record his reasons to believe in writing and pass an Order for continuation of freezing of the property in terms of section 20(1) read with 20(2), PMLA.
Service Tax
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Works contract services- services rendered to Software Engineers Employees Housing and Welfare Association - , the service tax liability needs to be limited to only 30% of the value of the total consideration received as we find from the C.A’s certificate.
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There being no dispute that the services rendered by the appellant to an unit in SEZ who was supposed to follow the provisions of the law, which he did not do so, would not mean that appellant should be saddled with the service tax liability.
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Job work - service or manufacture? - appellants received worn out threaded die rolls from their customers for rework/remanufacturing/reconditioning - The nature of activity is not a manufacturing activity - liable to service tax under maintenance or repair services.
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Condonation of delay of one year in filing appeal - proper communication of order - the identity of the receiver is not known nor is it clear whether the signatory is the authorized agent of the appellant or not. - Delay condoned.
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Classification of services - when lumpsum work is agreed upon to be rendered on rate contract payment, the same would not amount to manpower recruitment or supply agency service.
Central Excise
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Recovery of cash refund (erroneous refund) - area based exemption - duty on account of erroneous refund cannot be demanded on the allegation that the appellant was not a manufacturer
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Refund of reversed CENVAT credit - rejection of refund claim, which it is entitled to get by virtue as the order of this Tribunal, on the ground of unjust enrichment without any iota of proof of such unjust enrichment is erroneous
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Liability of excise duty - Goods removed by EOU to domestic tariff area without obtaining permission - the duty liability on goods would arise u/s 3(1) of the Central Excise Act, 1944 and not under the proviso to section 3(1) of the Central Excise Act, 1944
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Principles of natural justice - Sub-Rule (1) of Rule 23 of the CESTAT Rules states that the parties to the appeal shall not be entitled to produce any additional evidence either oral or documentary - But in specific cases, tribunal may allow additional documents to be produced or witnesses to be examined or affidavit to be filed.
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CENVAT Credit - input services - Garden Maintenance Services is required as per the guidelines of the PCB for the purpose of a better work atmosphere - credit cannot be denied.
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Condonation of the delay of 1553 days in filing the appeal - the assessee was not correctly advised that they would not be in a position to contest the merits of the matter before the Authority under the VCES - The facts clearly show that the reason for the delay has been explained.
VAT
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Classification of goods - multi function printers - MVAT - The printers sold by the appellant are classifiable under Entry 84.71 of the IT Products Notification as “laser jet printers”. The specific entry must prevail over the residuary entry.
Case Laws:
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GST
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2018 (12) TMI 1228
Classification of services - Works Contract or Composite Supply - combination of services of excavation of sand including loading with machinery at reach, Formation of Ramps and Maintenance of Roads, Transportation charges for the tractors/tippers of sand from reach to stockyard and Loading cost at sand from stockyard to lorries - rate of tax. Principal supply in a composite supply - Whether, in the services provided by the applicant under the Agreement with TSMDC, the principal supply is that of excavation of sand as held by the Central Member or transportation of goods i.e., sand as held by the State Member? - Held that:- The basic intent and purpose of the Tender / Contract-Agreement and the concomitant description of the scope of the work therein is to move / shift the mineral sand from one place to another, by means of transport by roads/ramps; for enabling the further despatch by TSMDC. The said activity i.e., transport of sand from one place to another therefore constitutes the predominant element in the instant case; the other activities of excavation (or extraction as also mentioned in Agreement), loading, unloading and reloading as also formation / maintenance of ramps/roads, are the incidental or ancillary activities, preceding, coinciding or following the said main activity of transportation from one place to another - the principal supply involved in this case is transportation of goods as held by the State Member and not excavation of sand as held by the Central Member. What is the classification of the principal supply which would thereby be the classification of the composite supply as held by the lower Authority? - Held that:- The principal supply in the instant case is that of transportation of goods i.e., sand. It is an urn-disputed fact and also explicitly recorded in the Agreement and tender documents that the said transport is by road only. The Scheme of Classification of services is laid down in the Annexure to the Notification No. 1 1/201 7-Central Tax (Rate) dated 28-6-201 7 which contains the entries pertaining to Land transport services - The classification of the services rendered by the applicant which have been held to be composite supply and in which the principal supply is found to be transport of goods by road are correctly classifiable under the Service Code (Tariff) 996511 under the Scheme of Classification of services laid down in Annexure to Notification No. 1 1/201 7- Central Tax (Rate) dated 28-6-2017. Whether the vehicles used by applicant for transport of sand i.e, lorries / trucks (or tractors / tippers, as mentioned in the application) are to be considered as covered by the term vessel appearing in the Notification-entry as held by the State Member or as not covered by the term as held by the Central Member? - Held that:- The vehicles used by applicant for transport of sand i.e, lorries / trucks (or tractors / tippers, as mentioned in the application) are not covered by the term vessel appearing in the Notification-entry as held by the Central Member; the contrary opinion expressed by the State Member is found to be not legally correct. What is the applicable rate of tax on the consideration received by the applicant for the impugned services? - Held that:- The applicable entry in respect of the impugned services would be the entry item Sl.No. (v) viz., Goods transport services other than (i), (ii), (iii) and (iv) above for which the applicable rate of tax is prescribed as 9% CGST (and correspondingly 9 % SGST). Hence, the applicable rate of tax on the impugned services is 9 % CGST + 9 % SGST (aggregating to 18%). Ruling:- The opinion expressed by the State Member in so far as holding that the Transport of goods is the principal supply in the impugned services, is confirmed. The classification of the impugned services is under Service Code (Tariff) 996511 Road Transport of goods.., as per Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The opinion expressed by the Central Member in so far as holding that the term vessel (appearing in item (ii) under Column (3) against entry at Sl.No.9 of the above Notification), is not applicable to the applicant s case, is confirmed.
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2018 (12) TMI 1227
Classification of supply - supply of goods or supply of services? - export of services or not - activities undertaken by procuring orders from a foreign party to print religious texts and thereafter deliver them to various places in India - Held that:- The Applicant is supplying the service of printing the Bible (the purchase orders and the tax invoice refer to supplying of printing service classifiable under heading 9989) to the recipient located in India - also, the Applicant’s supply is not the export of service, as the recipient of the service is located in India. It violates clause (b) of section 2(6) of the IGST Act. Furthermore, both the purchase orders and the tax invoice are in INR. Although the Applicant argues that the consideration is being received in US dollars, he has not clarified nor produced any evidence of how payment for purchase orders in INR and tax invoice raised in INR are made in foreign currency. It raises doubt about violation of condition under clause (d) of Section 2(6) of the IGST Act as well - The Applicant is making domestic supplies, on which he is liable to pay GST. Ruling:- The Applicant’s activity of printing the Bible under the specific orders received from The Gideons International is a supply of service classifiable under SAC 9989. The service is supplied to the recipient located in India and the consideration is apparently received in INR. The Applicant is, therefore, liable to pay GST under the appropriate Act on such supplies.
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2018 (12) TMI 1226
Rate of GST - construction of railway siding -r Sl. No 3(v)(a) or Sl No 3(xiii) of Notification no 11/2017-CT(Rate) dated 28.06.2017 - Held that:- The scope of work, as outlined in the Applicant’s agreement with DVC, is that of works contract, as defined under section 2(119) of the GST Act, fit to be called an ‘original work’ within the meaning ascribed to the term in para 2(zs) of Notification No. 12/2017-CT (Rate) dated 28/06/2017, and pertains to ‘railways’, provided it is meant for public carriage of passengers or goods. Whether the phrase “public carriage of passenger or goods” prevents a private siding from being included in the definition of ‘railways’ has repeatedly come up for judicial scrutiny. The courts generally held that the phrase ‘public carriage of passengers or goods’ cannot be construed in such manner as to exclude from the ambit of ‘railways’ the sidings built and owned by organizations other than the government. DVC, a public sector undertaking, is the owner of the railway siding being built. It is meant for carriage of coal and oil fuel to RTPS. The purpose of the carriage of goods is, therefore, not recreation, but producing public goods like electricity. It is, therefore, not excluded under section 2(31)(ii) of the Railways Act, 1989 - The construction of the private siding that the Applicant refers to, therefore, pertains to ‘railways’. Ruling:- Construction of a private railway siding for carriage of coal and oil fuel to Raghunathpur TPS, as described in the agreement between the Applicant and DVC, is a composite supply of works contract taxable @ 12% under Serial No 3(v)(a) of Notification no 11/2017-CT(Rate) dated 28.06.2017.
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2018 (12) TMI 1225
Seizure of goods alongwith vehicle - detention on the ground that during physical verification the goods were less in quantity then mentioned in the invoice - Held that:- The seized goods and the vehicle shall be released in favour of the petitioner on furnishing security of the value as provided in accordance with Section 129(1)(a) of the U.P. GST Act - petition disposed off.
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2018 (12) TMI 1224
Seizure of goods - petitioner is ready to furnish security to the satisfaction of the authority concern for the release of the goods - Held that:- The goods and the seized vehicle are directed to be released on the petitioner furnishing security to the satisfaction of the authority concerned in accordance with the provisions of Section 129(1)(a) of the U.P. GST as the petitioner is the owner of the goods - petition disposed off.
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2018 (12) TMI 1223
Rectification of returns - Section 172 of the Central Goods and Services Tax Act, 2017 - Held that:- Petitioners pointed out that apart from the routine rectifications, other corrections such as inadvertent reflection of a mandatory GST registration form, as voluntary or vice versa, which can lead to serious consequences cannot be rectified in the existing format in the GST portal. Learned ASG submitted that on this aspect, instructions would have to be obtained. List on 18.02.2019.
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Income Tax
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2018 (12) TMI 1222
Refund of the tax - Held that:- So far the petitioner has not demanded refund by submitting any application. In response, the petitioner's counsel submits that the Ext.P5 is a self-operating order. At any rate, the learned Standing Counsel assures the Court that if the petitioner applies, the Department will consider the petitioner's request expeditiously.
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2018 (12) TMI 1221
Seeking refund with interest on the basis of Income Tax Returns (ITR) - Withholding of refund u/s 241A - scrutiny assessment u/s 143(3) is pending - ACIT not processing income tax returns for four Assessment Years - Revenue argued that processing of returns without scrutiny would be prejudicial to its interests - interpretation of Section 143 (1D) - as per assessee once the one year period in proviso to Section 143 (1) ends, the return and whatever calculations are contained in it, with respect to tax liability as well as the consequential refunds, become final, subject to only one event: issuance of notice under Section 143 (2). Held that:- Section 143(2) empowers, the AO to issue notice to the assessee to produce documents or other evidence, to prove the genuineness of the income tax return. Under section 143(1D) of the Act as introduced by the Finance Act, 2012 processing of a return under Section 143(1)(a) is not necessary where a notice has been issued under Section 143(2) of the Act. This provision has now been amended by the Finance Act, 2016 (with effect from the AY 2017-18) to provide that if scrutiny notice is issued under Section 143(2), processing of return shall not be necessary before the expiry of one year from the end of the financial year in which return is submitted. In this case, acknowledgement or intimation had not been sent by the AO. There is no doubt that the period of one year indicated in the second proviso to Section 143 (1). However, Section 143 (1D) begins with a non-obstante clause that overbears that provision. For the AYs in consideration, for AY 2014-15, the petitioner has approached the AAR and for AYs 2015-16 and 2017-18, scrutiny assessments are pending before the AO. The AO has exercised discretion under Section 143(1D) not to process the returns considering the fact that substantial demand has been raised on completion of scrutiny assessment of earlier years. The petitioner has undertaken two schemes of amalgamation involving merger of certain group companies in order to restructure its business operations and increase operational efficiencies. In light of the above fact, assessments for the AY 2012-13 and 2013-14 are under special audit and any demand that would arise from the processing of the said assessment years are to be allowed to be adjusted against the refund claims. The petitioner s position is that it is not in a good financial condition. There is some merit in the revenue s argument that substantial outstanding demand are pending against the petitioner. Further, the likelihood of substantial demands upon the assessee after the scrutiny for the AYs is completed, cannot be ruled out. The Revenue should have the right to adjust the demands against the refunds that may arise but have not yet been determined due to ongoing scrutiny proceedings. As far as the argument that the expiry of the one year period, per second proviso to Section 143 (1) resulting in finality of the intimation of acceptance, this court is of opinion that the deeming provision in question, i.e. Section 143 (1) (d) only talks of two eventualities: shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). Secondly, that intimation or acknowledgement cannot confer any greater right than for the assessee to ask the AO to process the refund and make over the money; it is up to the AO- wherever the possibility of issuing a notice under Section 143 (2) exists, or where such notice has been issued, to apply his mind, and decide whether given the nature of the returns and the potential or likely liability, the refund can be given. It does not mean that when an assessment -pursuant to notice under Section 143 (2) is pending, such right to claim refund can accrue. This court also recollects the decision of the Supreme Court in Deputy Commissioner of Income Tax v Zuari Estate Development Investment Co Ltd [2015 (8) TMI 480 - SUPREME COURT] which held that an intimation under Section 143 (1) is not to be considered as an assessment. No merit in petitioners argument - Appeal dismissed.
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2018 (12) TMI 1220
Reopening of assessment - applicability of Section 50C - Held that:- Perusal of the impugned order indicates that the Assessing Officer except extracting some case laws and making his general observation on the power under Section 147, has not adverted to any of the contentions raised by the petitioner in their objection against the reasons for re-opening, more particularly, with regard to the applicability of Section 50C to the facts and circumstances of the present case. Needless to state that the AO while considering the objections raised against re-opening has to necessarily deal with each of the objections raised and express his decision on those objections. A mere statement of power vested on the authority under Section 147 is not enough to presume that he has applied his mind to the objections. This Court makes it very clear that it is not expressing any view on the merits of the above contentions raised by the learned Senior Counsel for the petitioner, as this Court is inclined to set aside the order dated 22.11.2018 and remit the matter back to the AO to pass fresh orders, by considering all the objections raised by the petitioner, through their communications dated 09.11.2018 and 18.11.2018.
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2018 (12) TMI 1219
Assessment u/s 153A - block assessment - Exclusion of Income disclosed under Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) - Held that:- The petitioner has voluntarily surrendered and deposited tax, surcharge and penalty under the PMGKY on the conditions held out in the said scheme as laid down in clause 199I and 199J which clearly provides that the amount of undisclosed income declared in accordance with section 180 shall not be included in total income of the declarant for any assessment year under the Income Tax Act, if the declarant make the payment of tax and surcharge referred to in section 184 and the penalty referred to in section 185, by the date specified under subsection (1) of section 187, and further embargo has been placed upon the department not to reopen any assessment of reassessment under the said provision . The show cause notices dated 30.05.2018 issued un/s 153A pertain to the assessment years 2011- 12 to 2016-17. It may be possible that the income surrendered by the petitioner may relate to any period covered by the aforesaid notices, and for those assessment years the embargo as provided for in clause 199I and 199J may apply. It is for the assessing officer to come to such a finding after going through the declarations made by the petitioner under the PMGKY as well as the response filed pursuant to the said notices. After going through the written instructions submitted by the respondents, we are satisfied that the apprehension and the grievance of the petitioner has duly been taken note of by the respondents and we hope and trust that it will be taken into consideration, while making the final assessment order under Section 153A of the Income Tax Act. No interference is called for by us in exercise of writ jurisdiction Article 226 of the Constitution of India, as the notices have been issued by the competent authority (Assessing Authority), and no lack of jurisdiction has been alleged or pointed out by the petitioner. The grievance of the petitioner stands fully redressed in light of the written instructions of the respondents which state that the income which has been disclosed by him under the PMGKY shall be excluded from the assessment of the block year for which notice under Section 153A has been issued by the respondent
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2018 (12) TMI 1218
Entitlement to deduction u/s 80IA - interest income from deposit, Miscellaneous Income and other rent - Held that:- For the claim for exemption u/s 80IA it requires interpretation of the documents and how the income was treated in the hands of the assessee and how the contracting parties understood the transaction, whether the notification issued by the Government of India mandates the provision of other amenities and facilities and whether these amenities and facilities are integral part of the infrastructural project, are all factual matters to be decided by the Assessing Officer. Though the Revenue would contend that the documents were not placed before the Tribunal, we do not want to shut out the assessee on technicalities, as the issue is a recurring issue and the endeavour should be to give a quietus to the issue and to ensure that the correct income is taxed at the hands of the assessee. Thus, for the above reasons, the order passed by the Tribunal on the above issue is set aside and the matter is remanded to the Assessing Officer for fresh consideration. The assessee is granted liberty to place all the documents before the Assessing Officer, who shall consider that issue afresh. So far as the sample Lease Deed is concerned, we are fully conscious of the fact that it is dated 12.07.2010 and obviously the assessee could not have produced the same either before the Assessing Officer or before the CIT(A) or before the Tribunal, because, all the proceedings concluded in the year 2008 itself - assessee is at liberty to produce the copies of the relevant documents
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2018 (12) TMI 1217
Reopening of assessment - disallowance of deduction u/s 80HHC - whether interest received from dealers for belated payments cannot be included in the business profits for the purpose of deduction under section 80HHC? - Held that:- As decided in case of JET AIRWAYS (I) LTD. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed juris- diction. Further, it was held that for every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148 of the Act. Thus, it was held that the Assessing Officer had jurisdiction to reassess the income other than the income in respect of which the proceedings under section 147 were initiated, but, he was not justified in doing so when the reasons for the initiation of those proceedings ceased to survive. Therefore, the argument advanced by the Revenue placing reliance on Explanation 3 to section 147 is of little avail. Reopening of the assessment itself was bad in law, we may not be required to decide other issue as to whether the finding of the Assessing Officer with regard to computation of eligible profits for the purpose of section 80HHC of the Act was correct or not. We are convinced that reopening of the assessment on the said ground itself was unsustainable for the reason that in the scrutiny assessment under section 143(3) of the Act, this very issue, namely, regarding deduction under section 80HHC was considered by the Assessing Officer and a detailed working had been done and the tax pay- able was calculated. Therefore, if the Assessing Officer is to reopen the finding rendered in the scrutiny assessment, then it would clearly amount to change of opinion, which is impermissible. - Decided in favour of assessee.
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2018 (12) TMI 1216
Disallowance made under section 14A read with rule 8D(2)(iii) - whether neither the assessing authority nor the Dispute Resolution Panel (DRP) has recorded specific finding as to whether the assessee has incurred specific expenditure or not even when the ingredients of section 14A are satisfied in the case of the assessee? - Held that:- As decided in case of M/S. ADVAITH MOTORS PVT. LTD. [2018 (6) TMI 1469 - KARNATAKA HIGH COURT] disallowance under Section 14A cannot be a wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. It is not deemed disallowance under Section 14A of the Act but an enabling provision for assessing authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the exercise of computing the disallowance under Section 8D of the Rules. Such abdication of duty in not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case calls for a remand. See Commissioner of Income Tax & Anr. Vs. Microlabs Ltd., [2016 (4) TMI 219 - KARNATAKA HIGH COURT]. Also this court in a recent judgment in Principal CIT v. Softbrands India P. Ltd. [2018 (6) TMI 1327 - KARNATAKA HIGH COURT] has held that in these types of cases, unless an ex facie perversity in the findings of the learned Income-tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under section 260A of the Act is not maintainable. - decided in favour of assessee.
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2018 (12) TMI 1215
Rejection of books of accounts u/s 145(3) - claim of unvouched expenditure - expenditure on sub-contract - part of contract executed by consortium members - accrual of income where issue has been referred to arbitration - Held that:- Assessing Officer is not right in rejecting the books of accounts of the assessee for the reason that the ld AO could not appreciate the nature of the business of the assessee and purpose of entering into consortium contract. He did not consider that assessee was only a pass through entity between the principle and the consortium members for the purpose of the above infrastructure project. The amount paid to the consortium members are also supported by the separate contracts entered into between AOP and consortium members for executing there part of the work. In fact each member was separately responsible for their own work - Decided against revenue Accrual of income - Realization of the claim of the assessee as it was referred to arbitration - Held that:- Bill raised by the assessee but not accepted by GAIL. The issue is whether the income accrues in the hands of the assessee despite it being disputed by the payee. It is also an accepted fact that there was a dispute and matter was referred to arbitration. Therefore, it was not sure whether the assessee has acquired right to receive the above income. Income can be held to accrue only when the assessee acquires a right to receive that income. Unless, the assessee acquired that right it merely remains a claim and not income. The mere raising a claim or a bill does not by itself create any legally enforceable right to receive any income. The Hon'ble Supreme Court in Godhra Electricity Vs. CIT [1997 (4) TMI 4 - SUPREME COURT] has held that unilateral increase in the rates of electricity shown as receipt in the books which could be realized due to protracted litigation did not result in an accrual of income, hence, such amount was not assessable. Therefore, in the present case there was no certainty of realization of the claim of the assessee as it was referred to arbitration, we confirm the finding of the ld CIT(A) in holding that such amount of ₹ 26.10 crore did not have any right to receive acquired by the assessee and hence, cannot be held as income chargeable to tax in the hands of the assessee.- Decided against revenue Set off of loss of AOP - Held that:- Undisputedly the assessee is a part of consortium which received a contract from GAIL for laying pipeline. Each of the consortium member also entered into sub-contracting agreement with the AOP for carrying out the above work and also sharing the gross receipts. Admittedly, the work has been executed by the members of the AOP by sharing of the gross receipts and incurring necessary expenditure to execute that contract, if any loss or income earned by them is chargeable to tax in their hands only. Therefore, we do not find any infirmity in the order of the ld CIT(A) in allowing the loss to the assessee. In view of this the only ground raised in appeal of the revenue is dismissed.
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2018 (12) TMI 1214
Penalty u/s 271(1)(c) - loss on sale of shares - change in head of income by AO - claim of the business loss made by the assessee has been rejected by the AO and held the same as long-term capital loss as the assessee in earlier years has not treated the shares as stock-in-trade - Held that:- The Assessing Officer has changed the head of income from business loss to long-term capital loss. As decided in CIT Vs Amit Jain [2013 (1) TMI 340 - DELHI HIGH COURT] merely change of head of income cannot characterize furnishing inaccurate particulars or suppression of facts and thus no penalty can be levied in such circumstances. Thus penalty to be deleted. - Decided in favour of assessee.
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2018 (12) TMI 1213
Disallowance of conference expenses - Held that:- No error in the order of the CIT(A) on the issue of disallowance of conference expenses and accordingly, we uphold the same. The grounds raised on the issue in dispute are accordingly dismissed. Travelling expenses disallowance - Held that:- It is evident that the expenses have been incurred in relation to extension of the stay, cancellation of the air ticket, bar party, photographers, smoothies ordered by Mrs Gayathri Luthera in hard rock etc. Thus, the tour was for the entertainment of the counsels and their family members and it has not served any business purpose of the assessee firm. In the case law relied upon by the disallowance was in relation to staff welfare expenses and for arranging get-together of the employees along with the training session. In the instant case nothing has been brought on record that the trip was in relation to any business activity of the assessee firm, and thus ratio of the case law relied upon by the is not applicable over the facts of the instant case. The assessee has failed to establish that the expenses were incurred wholly and exclusively for the purpose of the business and thus same is not allowable under section 37(1).
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2018 (12) TMI 1212
Assessment u/s 153A - assessment as framed U/s 143(3) and within the time limit provided U/s 153B(1)(b) - Held that:- A notice was issued by the AO u/s 153A and the Tribunal has decided the issue by considering that the Assessing Officer initiated the proceedings U/s 153A of the Act whereas in the case in hand, the Assessing Officer issued a notice U/s 142(1) of the Act on 12/12/2014 because the assessee did not file any return of income U/s 139(1) of the Act. As apparent the facts in the case in hand are distinguishable and therefore, the decisions relied upon by the assessee will not help the case of the assessee. Accordingly, no substance or merits in the ground No. 1 of the assessee’s appeal, hence, the same is dismissed. Disallowance of interest - Held that:- Once the assessee has claimed the loss on account of interest then it is the primary onus of the assessee to prove and establish the allowability of the claim against the business income. To the extent of the interest which was paid on the fund used for investment, the same cannot be allowed against the business income. The assessee has expressed his inability to segregate the details, therefore, in the facts and circumstances of the case, we do not find any reason to interfere with the order of the CIT(A), hence, this ground of assessee’s appeal is dismissed. Addition in dairy business - N.P. determination - AO excluded the closing stock from the net profit declared by the assessee - Held that:- Once the assessee has declared net profit which is to be taken for the purpose of income tax then the exclusion of closing stock from the net profit is not permissible. Even otherwise while computing the net profit as per the principle of accounting standards, the opening and closing stock are very much part of the P&L account and cannot be excluded for the purpose of even estimating the income U/s 44AD of the Act. Once the assessee has declared net profit of more than 8% even after excluding the interest income of ₹ 1,475/- then no addition is called for. Therefore, the net profit declared by the assessee excluding the interest income is 8.44% then even applying the deeming provisions of presumptive income U/s 44AD of the Act, no addition is called for as the net profit declared by the assessee is more than 8% as provided U/s 44AD of the Act. Accordingly we delete the addition made by the Assessing Officer. Addition on account of unexplained investment in jewellery - Held that:- Neither the AO nor the ld. CIT(A) has considered the jewellery which was declared in the revised return of income and further the purchases made by the assessee from 16/5/2011 to 30/1/2013 as per the purchase bills produced by the assessee. CIT(A) has turndown this explanation on the ground that the copies of the purchase bills were not found in the file of the Assessing Officer, therefore, if this claim of the assessee is found to be correct then no addition of ₹ 15.00 lacs is called for. Hence, in the facts and circumstances of the case, we set aside this issue to the record of the Assessing Officer to verify these facts of declaring the jewellery in the revised return of income as well as purchases made by the assessee from 16/5/2011 to 30/1/2013 as well as the jewellery recorded in the books of account. If the claim of the assessee is found to be true then no addition on this account is required to be made.
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2018 (12) TMI 1211
Deduction u/s 10A/ 10AA in respect of interest income and miscellaneous income - Held that:- In the present case it has been claimed that the interest has been owned by the assessee by way of parking of the surplus funds available with the units order from software development the activities temporary in fixed deposits. Therefore, respectfully following the decision of THE COMMISSIONER OF INCOME TAX AND ANOTHER VERSUS M/S. HEWLETT PACKARD GLOBAL SOFT LTD. [2017 (11) TMI 205 - KARNATAKA HIGH COURT] we also hold that the interest income earned by the assessee is an income eligible for deduction under section 10A of the income tax act. Therefore the learned assessing officer is directed to ground the deduction under section 10 A of the income tax act to the assessee on the interest income - Decided in favour of assessee. With respect to the miscellaneous income earned by the assessee, no details have been furnished to show that what nature of the income assessee has erred. We have also carefully produce the submissions made by the assessee before the learned Commissioner of income tax appeals placed at page number 130 of the paper book submitted before us. The whole contention raised by the assessee was with respect to only the interest income and there was no details furnished of the miscellaneous income earned by the assessee. In absence of nature of the income earned by the assessee, no adjudication on that aspect can be made. Assessee has also not furnished any evidences before us with respect to the nature of miscellaneous income earned by the assessee.- Decided against assessee.
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2018 (12) TMI 1210
Allowable business expenditure - Personal expenditure - Expenses on education of the daughter of one of the directors of the assessee company at the Boston University, which included college fee, boarding, travelling from India and back and other incidental expenses, have been incurred wholly and exclusively for the purpose of the business and allowable u/s 37(1) - Held that:- The assessee is before us in second round of proceedings. In first round, the Tribunal, questioned the assessee about the fact whether at the time of making application for admission to the MBA program, the company had sponsored Ms. Esha Arya or she had applied independently. The assessee was not able to furnish a copy of application for admission to the Boston University. In view of failure to substantiate the fact of a sponsoring by the assessee company, the Tribunal restored the matter to the file of the AO directing the assessee to file all evidences starting from the making of the application till making the last payment, for determining whether the expenditure was incurred by the directors of the company out of love and affection towards their daughter or it was an expenditure incurred in the course of the business of the assessee. As far as requirement of the filing of the application form, AO has noted that no original application was filed by the assessee before him. CIT(A) has also noted that no copy of application for admission was filed by the assessee before him. He has also noted that no other evidence have been filed related to documents submitted during visa interview before the USA Embassy Authorities. Thus, it is evident that the assessee has not complied with the direction of the Tribunal issued at the time of remanding the matter back to the Assessing Officer. Before us also, only information sheet/medical & physical history of the student has been filed and copy of admission form has not been filed. We find that the assessee has accepted the decision of the Tribunal in first round of proceedings and no appeal has been filed against the said direction of the Tribunal. In such circumstances, not complying with the direction of the Tribunal, itself is sufficient to dismiss the appeal of the assessee. In addition to the above, the documents filed in relation to the remitting of foreign exchange through M/s Thomas Cook private limited, nowhere demonstrate that payments were made as part of the sponsoring agency for furtherance of the business interest of the assessee company. We also find that the assessee has failed to justify its claim of appointment of Ms Esha Arya as a whole time director of the company, barely at the age of 18 years without any relevant educational qualification or experience. - Decided against assessee.
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2018 (12) TMI 1209
Transfer pricing - additions towards interest on inter-company outstanding receivables (arising on account of provision of IT-enabled services) - assessee has not charged any interest on the inter-company receivables which have been received beyond the period of agreement - Held that:- We find that the assessee has not charged any interest on the inter-company receivables which have been received beyond the period of agreement. The case of assessee pertains to A.Y. 2010-11, during which the inter-company receivables were not included in the category of international transaction. The inclusion of such receivables in international transaction was made by Finance Act, 2012 with retrospective effect. Therefore, it was not possible for the assessee to perform the formalities enunciated by the Finance Act, while preparing the TP study report for the year under consideration. It was not open for the assessee to include inter-company receivable in the international transactions in the TP study report and thus, the assessee had a good excuse for the same, as also held in various decision relied by the ld. AR. The case of the assessee stands on parallel footings EVONIK DEGUSSA INDIA P. LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX, MUMBAI [2012 (11) TMI 1248 - ITAT MUMBAI] In the case in hand, there is no interest liability or any external borrowings. In the agreement too, there is no condition to charge any interest for delayed payments by the AEs. The Revenue could not be able to adduce any contrary material against the aforesaid decision. Therefore, respectfully following the decision of co-ordinate Bench, the ld. Authorities below are not justified to make addition on inter-company receivables, as computed by them. Accordingly, the appeal of the assessee deserves to be allowed on this count. The other grounds raised by the assessee are consequential to this issue and therefore, the same do not need separate adjudication. - Decided in favour of assessee
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2018 (12) TMI 1208
Existence of AMP being an international transaction - creation of AMP expenses for the A.E - Held that:- The components of the assessee s Advertising and Sales promotion and postal expenses are different from what is ordinarily understood as an advertisement, marketing and promotion (AMP) expenses. The components of these expenses are that of billing material, personalization, promotion freight, list rentals and other promotions, premiums, sweeptakes judging, paper and printing of brouchers and also postage. Therefore, the same cannot in any circumstances lead to creation of AMP expenses for the A.E. From the records, it can be seen that the assessee is incurring its own selling and distribution expenses. There was no advertisement in media nor the products are available in the shop. It is made available only through order placed. There exist a distinction between product promotion and brand promotion. The mechanism used by the assessee company is altogether different for its product promotion. From the records, it can be seen that there is only a mail order marketing use as promotion for products sales TPO/DRP ignored these basic differences while holding that these expenses are international transaction itself. Besides that both the revenue authorities failed to bring on record as to how the said activity of the assessee company is having an element of international transaction itself. These factors were not at all verified by the revenue authorities. The issue of Bright Line Test method is now settled by the judicial precedence in case of the decision of the Hon ble Delhi High Court in case of PR. CIT vs. Mary Kay Cosmetic Pvt. Ltd.[2018 (9) TMI 1761 - DELHI HIGH COURT] Thus, this also should be looked into by the AO/TPO. Therefore, it will be appropriate to remand back this entire issue to the file of the AO/TPO for fresh adjudication.
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2018 (12) TMI 1207
Unexplained investment u/s. 69A - jewelry found in search - Held that:- CIT(A) has rightly held that assessee has sufficiently explained the jewellery found during search and therefore, no addition is called for and accordingly, correctly deleted the addition, which does not need any interference on our part, hence, we uphold the order of the CIT(A) on the issue in dispute and reject the grounds raised by the Revenue. - Decided against revenue.
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2018 (12) TMI 1206
Addition on account of deficit in stock - addition was made by the AO by taking the MRP of stock lying at the business premises - difference in computerized sheet as well stock as per physical inventory - Held that:- CIT(A) adopted gross profit rate of 55.68% and worked out the cost price at ₹ 13.71 Crores from this calculation cost price of physical inventory taken by the Survey team works out to ₹ 9,01,35,304/- and cost price of computerized sheet as maintained by the assessee comes to ₹ 13,71,90,491/-. Thereafter there remains a difference of ₹ 4,70,55,187/- (Rs.13,71,90,491 - ₹ 9,01,35,304) being deficit in the stock between stock as per assessee's noting in computerized sheet as well stock as per physical inventory taken by the Survey team. CIT(A) further observed that difference between the physical stock of inventory and stock as per notings on computerized sheets was due to various articles given on approval to various parties like Shopper's shop, Promart, Waman HariPethe. The stock given to the above parties . account for about to ₹ 3.22 crores which includes the stock of assessee's shops at R. City Ghatkopar and Borivli worth around ₹ 50 lakhs. Apart from that it was found that the assessee has given articles of ₹ 96 lacs for framing. CIT(A) further observed that complete name and addresses of invoices of all the parties to whom assessee had given goods on approval basis were also given to the Survey Officer on 19/10/2010. Accordingly, after having a detailed calculation, the CIT(A) reached to the conclusion that assessee has explained the difference to the extent of ₹ 4.18 Crores (Rs.3.22 +0.96) out of total difference of ₹ 4.70 Crores. Accordingly, the CIT(A) has deleted addition of ₹ 10.07 Crores and upheld addition of ₹ 52.55 Lakhs. It is clear from the order of CIT(A) that all the calculations of deficit in the stock was made are as per material on record. The detailed finding so recorded by CIT(A) has not been controverted by learned DR by bringing any positive material on record. Accordingly, we confirm the action of CIT(A) for deleting the addition and upholding part of the addition to the extent of 52.55 lakhs. There is no infirmity in the finding so recorded by CIT(A), which is as per material on record and therefore do not require any interference on our part - Appeal of the assessee as well as Revenue are dismissed.
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2018 (12) TMI 1205
Addition u/s 41(1) in respect of liability written back pertaining to dues payable to Bombay Port Trust - Held that:- There is no double benefit claimed by the assessee in the facts of the instant case, Moreover, we hold that the provisions of Section 41(1) of the Act could be invoked only if deduction for the very same sum has been allowed in earlier years for the assessee, which in the facts of the instant case, was not granted vide order of Ld. AO dated 30/3/2009. Accordingly, we direct the Ld. AO to delete the addition made u/s 41(1) - Decided in favour of assessee Disallowance in respect of sales promotion expense - expenditure pertains to purchase of Gold and Silver which were given to various customers for promoting its business - Held that:- Details before us to ascertain whether similar items of expenditure in the form of purchase of Gold and Silver were incurred in the past and whether the same were allowed as revenue expenditure by the department for the earlier AY. Hence we have to look at this issue in isolation based on the material available on record. It is not in dispute the assessee had duly produced the bills for incurrence of purchase of Gold and Silver to the tune of ₹ 2,04,186/-. But we find that the assessee had not established the nexus between the incurrence of this expenditure vis-à-vis the warehousing revenue derived by it. Hence, we hold that the lower authorities were justified in disallowing this claim of ₹ 2,04,186/- towards sales promotion expenses - Decided against assessee Rental income derived from the warehousing activities - income from business or income from house property - violation of provisions of Rule 46A of the Income Tax Rules by the Ld. CIT(A) by not affording an opportunity to the Ld. AO while granting relief to the assessee in respect of this issue - Held that:- We find that the impugned issue is fairly covered in favour of the assessee in its own case by the order of this Tribunal for AY 2010-11 as decided assessee is not providing warehousing service to one or two fixed customers. There is number of customers to whom warehousing service is provided. Apart from that the godwown control of the assessee; customer had no right of occupancy. As per the definition of business u/s 2(13) of the Act, business include adventure or concern in the nature of trade. - Decided in favour of assessee
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2018 (12) TMI 1204
Nature of receipt - subsidy received - revenue or capital receipt - Held that:- As decided in assessee own case relying on decision in the case of M/s. John Deere Equipments Pvt. Ltd. Vs. Dy. Commissioner of Income Tax [2015 (3) TMI 1336 - ITAT PUNE] held that the subsidy received by the assessee was capital in nature. During the year under consideration out of the balance due of ₹ 2.36 crores, the assessee has received ₹ 1.26 crores during the year under consideration and in view of the decision of Tribunal in assessee’s own case in hand in the earlier year the said subsidy is to be treated as capital receipt in the hands of the assessee. Though, the assessee is in the original return of income had included the same in its hand, but the same is to be excluded being not taxable. Accordingly, we uphold the order of Commissioner of Income Tax (Appeals) and dismiss the grounds of appeal No. 1 to 4 raised by the Revenue. Deduction on account of belated payments of employee’s contribution to PF and ESIC - Held that:- As relying on M/s. Hindustan Organics Chemicals Ltd. [2014 (7) TMI 477 - BOMBAY HIGH COURT] where the assessee has paid the said amount due on account of employee’s contribution to PF and ESIC before due date of filing of return of income, which is mentioned in the assessment order itself, there is no merit in the grounds of raised by the Revenue in this regard. - decided against revenue
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2018 (12) TMI 1203
Disallowance u/s 14A r.w.r. 8D(2)(iii) - Held that:- Respectfully following the decision of the Special Bench of ITAT, Delhi, in the case of ACIT Vs. Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] we also hold that only those investments are to be considered for computing average value of investment which yielded exempt income during the year under consideration for working out the disallowance u/s 14A r.w.r. 8D(2)(iii) in the case on hand. The assessee has submitted that the exempt dividend income of ₹ 1 Crore in this year has been earned only from M/s. Embassy Services Pvt. Ltd. Since this judicial pronouncement of the Special Bench of ITAT (supra) was passed subsequent to the passing of order of assessment for Assessment Year 2012-13, we restore this issue to the file of the AO only for the purpose of recomputing the disallowance u/s 14A r.w.r. 8D(2)(iii) of the Rules by restricting the disallowance thereunder i.e., for computing the average value of investments only to those investments which yielded the exempt income earned by the assessee during the year under consideration; as has been held and directed by the ITAT, Delhi Special Bench in the case of Vireet Investments (P) Ltd., (supra).
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2018 (12) TMI 1202
Accrual of Income in India - assessee as a non-resident company which received licence fees in terms of "Membership and Technology Transfer Agreement" - claim of exemption from income tax - computation of income u/s 44BB - taxability as royalty u/s 9(1)(vi)- levy of surcharge and interest u/s 234B - Held that:- If one goes by the definition as enshrined in the Treaty read with relevant provisions of Indian Copyright Act, 1957 and also the relevant Agreement amongst the parties, it is seen that the payment for CMG’s membership by the ONGC is purely for non-exclusive, non-transferable licence to use the technology only for the internal purpose. There is neither sale nor licence of the copyright in any kind of software or technology. Thus, under the treaty, such a payment cannot be held to be reckoned as royalty. We hold that nature of payment as received by the assessee through ONGC in terms of the aforesaid agreement cannot be characterized as ‘royalty’ and, therefore, the same is outside the purview of taxation in view of India-Canada DTAA. Accordingly, this issue is decided in favour of the assessee. In so far as whether amendment in section 9(1)(vi) can be read into the Treaty, this issue now stands at rest for the various judgments of the Hon'ble Delhi High Court including that of DIT vs. Infrasoft Ltd. (2013 (11) TMI 1382 - DELHI HIGH COURT) wherein as held that the amendment in the domestic law cannot be read into the Treaty. In view of our finding given above, the issue of levy of surcharge and interest u/s 234B has become purely academic though as stated by the ld. counsel this issue now stands covered in favour of the assessee by the judgments referred and relied upon before us. From assessment year 2007-08 onwards there is a payment for purchase order of additional software for annual lease wherein certain addition has been made in the earlier membership and technology transfer agreement whereby certain technology executable has been given access to. The ONGC is paying annual lease charge with maintenance, which again, is not for purchase of any software and similar payment in assessment year 2005-06 has been held to be not royalty by the ld. CIT(A). From the perusal of the invoices raised, it is seen that the payment has been made for annual lease charges with maintenance and once in the earlier years it has been held not to be in the nature of royalty, then, same payment cannot be held to be ‘royalty’ in this year. - Decided in favour of assessee.
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2018 (12) TMI 1201
Penalty u/s 271AAB (1)(c) - assessee admitted undisclosed income which was recorded under statement u/s 132(4) - Held that:- On reading of provisions u/s 271AAB of the Act, it is justified to hold that the assessee shall pay penalty u/s 271AAB @ 10% under clause (a) of subsection (1) of section 271AAB of the Act for the reasons set out hereunder under:-[1]. Search action u/s 132 of the Income Tax Act, 1961 should be initiated u/s 132 on or after 01.06.2012; [2]. The assessee has made disclosure of undisclosed income during the course of search action, has paid the tax together with interest and has filed return of income; and [3]. The assessee substantiates the manner in which he has earned the undisclosed income and in view of the above, the order of CIT(A) is set aside. Ground No-1 raised by the Revenue is partly allowed. Thus, the order of AO is restored to the extent s indicated above. Defective Show-cause notice issued u/s 274 r.w.s 271 - Held that:- On perusal of the said notice, it is observed in the last paragraph that the AO directed the assessee to appear before him on specific date seeking explanation why an order u/s 271AAB of the Act be made? Therefore, in our opinion, the said notice does not appear to be defective and ambiguous as contended by Ld.AR. In the last paragraph of the said notice, the AO clearly mentioned the provision u/s 271AAB of the Act so therefore, it is clear that the AO conveyed on which provision the proceedings are being initiated and the assessee filed reply to the said notice. Therefore, Ground No.2 raised in C.O filed by the assessee fails and it is dismissed. Imposition of penalty @ 30% instead of 10% or 20% - In order to fall under clause (a) of sub-section (1) of section 271AAB of the Act to compute the penalty @ 10%, the assessee has to fulfill the conditions therein. On perusal of the clause (a), the assessee fulfilled all the conditions therein and therefore, penalty shall be @ 10% in terms of clause (a) of sub-section (1) of section 271AAB of the Act. Therefore, the AO is not justified in impose penalty @ 30% vide clause (c). Therefore, the AO is directed in imposing penalty @ 10% under clause (a) of subsection (1) of section 271AAB
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2018 (12) TMI 1200
Reopening of assessment u/s 148 - non grant of approval from competent authority - Held that:- Section 151 of the Income Tax Act, 1961 contemplates that no notice under section 148 shall be issued by the AO, after the expiry of a period of four years from the end of the relevant assessment year, unless necessary approval from Commissioner or competent authority is obtained. No doubt in the present case, AO has applied for such approval which was granted on 29.3.2017, but before grant of approval, the AO has already issued notice on 28.3.2014 which is without any jurisdiction. He can issue notice only after getting approval. CIT(A) has rightly quashed the assessment because the very foundation for issuance of notice under section 148 is the approval from the competent authority, i.e. Commissioner of Income Tax, and in the absence of such, such notice is void ab initio. - decided against revenue.
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2018 (12) TMI 1199
Addition made on account of non-genuine purchases - Held that:- Direct the AO to restrict the addition to the extent of 5% of the alleged non-genuine purchases in both the assessment years. Consequently, the grounds raised by the assessee are partly allowed.
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Customs
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2018 (12) TMI 1198
Revocation of CHA License - forfeiture of security deposit - Imposition of penalty - time limitation - it is contended that the impugned order passed beyond the period of limitation cannot be sustained for want of jurisdiction - Held that:- From Regulation 20(1), it is seen that the Commissioner of Customs shall have to issue a notice to the Customs Broker within a period of 90 days from the date of receipt of the offence report. In this case, the show cause notice was issued only on 02.03.2017, based on the offence report dated 27.09.2016 received at the office of the respondent. Though the show cause notice does not say as to when such offence report was received by the respondent and the very notice itself was issued only on 02.03.2017, the date of issuance of such notice has to be construed as the date of receipt of offence report - Going by the date of receipt of the offence report and the date of issuance of the show cause notice, it is evident that the show cause notice issued was beyond the period of 90 days and thus, the same is in violation of Regulation 20(1) of the Customs Broker License Regulation, 2013. Limitation prescribed under Regulation 20(7) - Held that:- In this case, it is admitted in the impugned order itself that the report of the Enquiry Officer was submitted before the respondent on 17.05.2017. However, the impugned order was passed admittedly, on 13.10.2017, which is clearly beyond 90 days, as required under Regulation 20(7) - this Court is of the view that issuing the show cause notice beyond the period of 90 days is in violation of Regulation 20(1) and passing the impugned order after 90 days from the date of receipt of report is in violation of Regulation 20(7). This Court is fully convinced that the impugned order cannot be sustained for want of jurisdiction on the very reason that the same was passed beyond the period of limitation - petition allowed.
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2018 (12) TMI 1197
Validity of second SCN - import of restricted item - OWC Drilling Chemical Additive - imposition of penalty - Held that:- The authorities were not justified in proceeding against the appellant under the Regulations in respect of the very same transactions which were the subject matter of the first show cause notice, and in respect of which the penalty levied upon him had already been set aside. The first order having being set aside by the Tribunal, on the ground that no specific contravention of the Act had been alleged or established against the appellant, it is difficult to see how the Revenue could sustain an entirely inconsistent order in respect of the second show cause notice. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1196
Classification of imported goods - whether classified as LCD TVs or classified as LCD Monitors and TV Tuners Boards separately? - Confiscation - penalty. Held that:- The goods in question were LCD TVs in partly disassembled condition inasmuch as the TV tuner boards were kept separately. Unfinished and semi-finished goods in such a disassembled stage are classifiable as LCD TVs of 42 47 size - the order of the first appellate authority, if any, is not binding on the Tribunal and such decision, if made, cannot alter the classification of goods in question. Confiscation - penalty - Held that:- It is evident that the appellant had declared the goods as per the invoice, packing list and purchase orders as LCD Monitors and TV tuners with remotes separately. Simply claiming the classification as such in their bill of entry does not amount to mis-declaration of the nature of the goods. Therefore, the charge of the mis-declaration of the goods is not sustained and consequently confiscation of the goods is liable to be set aside - the penalties imposed on the importer and others in the impugned order also need to be set aside. Demand of duty with interest confirmed, but confiscation and penalty set aside.
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2018 (12) TMI 1195
Duty exemption entitlement scheme - Condition of N/N. 203/92-Cus dated 19th May 1992 not complied with - credit on inputs procured locally or otherwise, for use in manufacture of the export goods had not been availed - validity of SCN - Held that:- The SCN has been issued on the presumption of availment of input stage credit without any narrative of the scrutiny that led to such conclusion. The very same fault-lines are apparent in the impugned order. The repetition of the standard narration of a SCN with the same tentative conclusion therein does not suffice to hold that all licence-holders, who had not taken advantage of the amnesty scheme by reversal of input credit availed prior to 31st January 1997, have rendered themselves non-compliant. SCN and the adjudication order are found to contain errors that are impossible to repair, or rectify, and, in the face of such irreparable error, the impugned order must be set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1194
Refund of SAD - Denial on the ground of time limitation - N/N. 102/2007-Cus. Dated 14.09.2007 - Held that:- The SAD is payable by an assessee for setting off of VAT/ST/CST is payable by the appellant being a trader. Unless and until VAT/ST/CST is paid by the assessee, they cannot file refund claim, therefore, it is required to be seen on which date cause of action arose of filing the claim of refund. Admittedly, the relevant date in such a case as per Section 11B of the Central Excise Act, 1944, when is the cause of action arose i.e. the date of payment of VAT/ST/CST. From that date, within one year, the assessee required to file the refund claim. Therefore, the relevant date (in these matters) is the date of payment of VAT/ST/CST - in the present case, the refund claims have been filed by the appellants within one year from the date of payment of VAT/ST/CST. The refund claims cannot be rejected on ground of limitation - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1160
Suspension of CHA License - case of petitioner is that the third respondent/Inquiry Officer has failed to file the report within 90 days from the date of issuance of the show cause notice - Held that:- There is no dispute to the fact that the show cause notice was issued on 13.04.2018. It is also not in dispute that the petitioner filed their reply and participated in the inquiry on 25.04.2018. However, the third respondent prepared the report only on 14.08.2018, which is evident from the perusal of the said report itself, made available in the typed set of papers. Therefore, it is clear that the third respondent has prepared the said report on 14.08.2018, which is undoubtedly beyond the period of 90 days from the date of issuance of the show cause notice. If the petitioner is an habitual offender, as alleged by the Revenue, it is not known as to what prevented the concerned authorities in proceeding against the petitioner by following the mandatory requirements contemplated under law. When there is a lapse on the part of the concerned authority in not making the report within the time stipulated which prevents further proceedings, the Revenue has to blame itself for such lapse, especially when the Courts have held that the period of limitation prescribed under the Regulation, as discussed supra, is mandatory. Therefore, it is for the authorities to be more vigilant in complying with the mandatory requirements under law, while proceeding against an offender without giving room for any lapse even on technicalities. This Court is inclined to set aside the impugned show cause notice dated 13.04.2018 - petition allowed.
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PMLA
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2018 (12) TMI 1193
Offence under Prevention of Money Laundering Act - Attachment of bank account - Held that:- The PMLA allows retention/continuation of freezing action by the Respondent No. 1 only under circumstances mentioned in Section 20(1) of the PMLA, that is, if the property is required for the purpose of adjudication under Section 8, PMLA. The Adjudicating Authority can authorize retention only if it is satisfied that the property is “prima facie involved in money-laundering and the property is required for the purposes of adjudication under section 8”. The Authority cannot permit retention or continuation of freezing order for any other purpose than those provided in section 20(4). As far as proceedings pertaining to freezing of properties under the PMLA, the officer carrying out the freezing action under 17(1A) has to record his reasons to believe in writing in terms of section 17(1) (i) to (iv), PMLA. Even after the property is frozen, the officer has to record his reasons to believe in writing and pass an Order for continuation of freezing of the property in terms of section 20(1) read with 20(2), PMLA. In the case, there is no other attachment, except the bank account. The impugned order dated 12.9.2017 against the appellant with regard to continuation of attachment of account is set-aside by allowing the appeal. However, it is clarified that, no opinion is expressed or any direction to the bank about the declaration of NPA, the said issue, if any by the bank to be decided or reconsidered as per its own merit. OA against the appellant is accordingly dismissed.
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Service Tax
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2018 (12) TMI 1190
Nature of activity - Job work - service or manufacture? - appellants received worn out threaded die rolls from their customers for rework/remanufacturing/reconditioning - Revenue officers are of the view that the process that is undertaken by the appellants on worn out threaded die rolls is not a manufacturing activity - Held that:- The activity is undertaken by them on various worned out die rolls received back from their customers which would mean that the process undertaken by them would not result in a new and distinct product in order to state that it is a manufacturing activity - the activity undertaken by the appellant cannot be considered as a manufacturing activity and the Finance Act will apply and appellant is required to discharge the service tax liability under maintenance or repair services. Time limitation - Held that:- The appellants have kept the department informed about their activity of reprocessing or reconditioning of the said threaded die rolls. Hence, the demand within the period of limitation from the date of the show-cause notice in these two appeals are only sustainable and the demands beyond the period of limitation are unsustainable and liable to be set aside. The demands raised within the limitation from the date of show-cause notice are upheld along with interest as also penalties and the demands which are raised beyond the period of limitation are set aside - interest and penalties also set aside - appeal allowed in part.
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2018 (12) TMI 1189
Liability of service tax - amount of tax to be paid on the services rendered by the appellant to SEZ Unit - Held that:- The services is rendered by appellant to SEZ unit and the said SEZ unit is authorised to receive the services without payment of service tax. The provisions of Section 51 of the Special Economic Zone Act, 2005 mandates that the provisions of SEZ Act shall have overriding effect notwithstanding anything inconsistent in any act. The provisions of Section 26 of SEZ Act mandates for exemption of service tax, draw backs and concessions to developer - On holistic reading, the services rendered to an SEZ unit are not taxable, is the settled law. There being no dispute that the services rendered by the appellant to an unit in SEZ who was supposed to follow the provisions of the law, which he did not do so, would not mean that appellant should be saddled with the service tax liability - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1188
Works Contract - EPC contracts - period from 2006-07 to 2010-11 - liability of service tax. Period prior to 01.06.2007 - Held that:- It is on record that the work executed on these contracts is works contract and on perusal of the same it is so, and if that be so, the law which is settled by the Apex Court in the case of Larsen and Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT] would cover the issue in favour of the appellant - service tax liability prior to 01.06.2007 on the turnover of ₹ 12.35 crores is unsustainable and liable to be set aside. Service tax liability post 01.06.2007 - works contract executed on behalf of Dakshin Infrastructure Pvt Ltd and Aparna Infra-housing Pvt Ltd. - Held that:- The contract entered into by the appellant with M/s Sudhama Projects Pvt Ltd indicate clearly that the appellant had agreed to sub-contract the entire work to sub-contractor M/s Sudhama Projects India Pvt Ltd [which subsequently became Poulomi Infra Pvt Ltd]. The said sub-contract entered into by the appellant with M/s Sudhama Projects in clause No 9 specifically indicates that sub-contractor is required to discharge sales tax and service tax on the completed works as applicable under the relevant Act. Subsequently, a certificate issued by M/s Sudhama Projects (now Poulomi) indicates that service tax liability on the entire contracted value has been discharged and enclosed the details of challan. The service tax liability on the contract executed by Sudhama Projects for the period post 01.06.2007 seems to have been discharged and the reference to challan No. and other payments are given in the statements annexed to the letter. Once the service tax liability due on the entire contract executed by sub-contractor is discharged, there is no reason for demand of any further service tax from the appellant - the service tax liability demanded from the appellant is liable to be set aside. Turn-over of the projects executed for APIICL, KTPS APSHCL and Software Engineer Employees Housing Association - Held that:- This issue needs to be addressed independently. Projects executed by the appellant for APSHCL and APIICL for the period 2010-11 - Held that:- From 01.06.2007, though works contracts are taxable, they would not be excisable if the services thereby is primarily for non-commercial, non-industrial purposes - In the case in hand, there is no allegation nor there is any finding as to the commercial nature of the buildings or the civil structure, constructed by the appellant for APSHCL and APIICL. Thus, on this ground, the demands raised on the appellant needs to be set aside - On limitation also, the demands fails for APIICL and APSHCL up to 2009-10. Liability of service tax - consideration received by the appellant for executing the projects given to them by KTPS - Held that:- The demand on the appellant for rendering services to KTPS, being rendered to generation of electricity which is must for transmission of electricity, is covered by the ratio and 11C Notification - It is nobody s case that KTPS is not producer of thermal electrical energy and electricity being an item that cannot be stored requires immediate transmission and distribution. In our view this activity of rendering service to KTPS would be covered by retrospective Notification No 45/2010 dated 20/07/2010 - demand set aside. Service tax liability - services rendered to Software Engineers Employees Housing and Welfare Association - Held that:- There is nothing on record to show that the said Software Engineers Employees Housing and Welfare Association was for non-commercial and non-industrial purposes and in our view, the turn-over needs to be taxed under works contract services. However, the service tax liability needs to be limited to only 30% of the value of the total consideration received as we find from the C.A s certificate that the materials used for executing such a contract could be of value of 70% of the contract amount - Upholding the tax demand, but reducing it to 30% of the value of the contract, we hold that appellant has to discharge the service tax liability along with interest on this amount - penalty also set aside. Liability of service tax - transportation of goods by road - Held that:- The argument of the learned counsel that the transportation of materials was within the site and hence not taxable is unacceptable in the absence of any evidence to show that it was so - in the absence of any evidence, the service tax liability of ₹ 6,89,387/- on the amount paid for transportation of goods by road needs to be upheld along with interest and also the penalty imposed thereon. Appeal disposed off.
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2018 (12) TMI 1187
Classification of services - technical know-how was transferred to M/s Lupin Ltd. for the manufacture of active Pharmaceuticals Ingredients - case of the department is that this transaction is of providing services of scientific or technical consultancy services - Held that:- On going through the agreement between the appellant and the Lupin Ltd, the transaction is of supply of technical know-how. The agreement is for supply of microbial strain and technology thereof and for ‘Demonstration’ on laboratory (shake flask) scale for the fermentation process to manufacture lovastatin by M/s Lupin Ltd. As per the terms of payment also, it is a one-time payment for supply of strain and technical know-how. In this case it is clear that the agreement between the appellant and Lupin Ltd is for supply of technical know-how for the manufacture of lovastatin by the Lupin Ltd. Therefore, allegation of the department that the services involved is the scientific and technical consultancy services, is incorrect. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1186
Business Exhibition Service - value of the entry tickets sold to general public - Held that:- It is true that there are also amusement facilities within the premises but that does not characterize it as an amusement facility. The exclusion of amusement facility under Section 65 B(9) also clarifies that amusement facility does not include a place within such facility where other services are provided - the appellant is liable to pay service tax w.e.f. 01.07.2012 on the value of the entry tickets sold to general public. Sale or transmission of electricity during the exhibition - Held that:- Rule 5(1) of Service Tax (determination value of service) Rules, 2006 as been already held ultra vires by the Hon ble High Court of Delhi which decision was upheld by the Supreme Court in the case of Intercontinental [2012 (12) TMI 150 - DELHI HIGH COURT] - demand set aside. Advertisement service - Publicity income which they received for sale of space or time for advertisement - period 2005-2006 to 2009-2010 - Held that:- The appellant is not disputing the demand and only contesting the imposition of penalty under Section 78 of the Act and will deal with the penalties separately. Short payment of service tax - Business Exhibition service - Mandap keeper services - Held that:- There is a dispute regarding the method of calculation and it requires further examination and decision by the original authority and the demand on this count needs to be remanded to the original authority - matter on remand. Interest on delayed payment of service tax - stall rentals received in advance - Held that:- Merely because some applicants are not allotted a stall and their amounts are refunded to them the service tax does not get payable only after the allotment process is complete. As there was a delay in payment of service tax on stall rentals received is liable to interest and confirmed penalty - demand upheld. Renting of immovable property service - Held that:- The appellants paid the service tax along with interest and is only contesting the rent pertaining to the months of April and May, 2007 on the ground that the renting of immovable property became a taxable services vide Section 65 (105) (zzzz) of the Finance Act, 1994 is w.e.f 01.06.2007 - demand set aside. Penalty u/s 78 - Held that:- The appellant is a charitable society registered as such and is engaged in the organizing industrial exhibition. It is difficult to attribute malafide intention to evade payment of service tax so as to defraud the Government by the society. Even if their understanding the law is different from the understanding of the Department that should not form a basis for imposition of penalties - this a fit case to set aside the penalties imposed under Section 80 of Finance Act, 1994 - penalty set aside. Appeal disposed off.
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2018 (12) TMI 1185
Non-payment of service tax - period 2012-13 and 2013-14 - Rule 6 of STR - Held that:- The matter requires de novo adjudication by the adjudicating authority. The adjudicating authority shall pass a de novo Order after considering the pleas of the appellant keeping in mind the requirements of law and also after affording sufficient opportunities to the assessee - appeal allowed by way of remand.
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2018 (12) TMI 1184
Classification of services - manpower recruitment or supply agency service or not - work of grinding roasted coffee beans, blending coffee powder with chicory and packing of coffee powder - Held that:- It is seen from the invoices as well as from the records that the appellant was receiving charges on the basis of kilogram of coffee powder which is subjected to various activities of grinding, mixing, blending etc. The payment is not in respect of number of persons engaged or work done on daily basis or hourly basis. The Tribunal in the case of Divya Enterprises Vs. Commissioner of Central Excise, Mangalore [2009 (12) TMI 155 - CESTAT, BANGALORE] had occasion to analyse a similar issue and held that when lumpsum work is agreed upon to be rendered on rate contract payment, the same would not amount to manpower recruitment or supply agency service. Demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1183
Site formation and clearance services - Sub-contract - the main contractor has discharged the service tax liability entirely - period from 16.6.2005 to December 2008 - Held that:- All the aspects have not been considered - there are certain discrepancies to the quantification which needs to be rectified by the clarifications that has to be produced by the appellants - the matter requires to be remanded to the adjudicating authority - appeal allowed by way of remand.
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2018 (12) TMI 1182
Condonation of delay of one year in filing appeal - proper communication of order - Held that:- The issue decided in the case of Saral Wire Craft Pvt. Ltd. Vs. Commr. of Cus., C.Ex. & Service Tax [2015 (7) TMI 894 - SUPREME COURT], where it was held that miscarriage of justice has taken place, in that the Authorities/Courts below have failed to notice the specific language of Section 37C(a) of the Act which requires that an Order must be tendered on the concerned person or his authorized agent, in other words, on no other person, to ensure efficaciousness. Similar is the case on hand: the identity of the receiver is not known nor is it clear whether the signatory is the authorized agent of the appellant or not. The appellant has made out a case, the explanation for delay appears to be bona fide and not suspected by the first appellate authority as well and hence the same is accepted - the matter is remanded to the file of the first appellate authority - appeal allowed by way of remand.
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2018 (12) TMI 1181
Validity of SCN - case of appellant is that the category of services are not clear from the show cause notice or the impugned order, which has confirmed the demand - Held that:- The department has not mentioned the category / classification of the service under which the demand is made. Various allegations have been raised in the SCN. However, the classification of the service upon which the specific demand of service tax has been made is not forthcoming. Even after receiving the reply of the appellant, the adjudicating authority has not been able to confirm the demand under a particular category. The department has not considered the exemption eligible for agricultural produce and has raised the demand without mentioning the category of service. It is not understood whether the demand is on storage or warehousing services or under GTA service - There is a fundamental flaw in the show cause notice as well as in the impugned order. The demand cannot sustain and requires to be set aside - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (12) TMI 1180
Condonation of the delay of 1553 days in filing the appeal - whether the appellant had shown sufficient cause for not having preferred any appeal before the Tribunal within the period of limitation? - Held that:- the assessee was not correctly advised that they would not be in a position to contest the merits of the matter before the Authority under the VCES. Therefore, the application filed under the VCES was rejected by order dated 15.11.2013 on the technical ground with regard to issuance of notice. - Before the Tribunal, it appears that the assessee was questioned as to whether they had challenged the order dated 27.8.2013, to which, the assessee explained that they pursued the matter under the VCES as they were advised to do so. Not convinced with the explanation, the Tribunal dismissed the appeal by order dated 25.10.2017. The facts clearly show that the reason for the delay has been explained, the explanation offered is reasonable and convincing - thus, the appellant had shown sufficient cause in not being able to prefer the appeal within the period of limitation. The delay in filing the appeal should be condoned - decided in favor of assessee.
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2018 (12) TMI 1179
Principles of natural justice - infraction of Rule 23 of the CESTAT Rules - whether the veracity of the receipt of fly ash from outside sources to the extent claimed by the assessee was correct or not? - Held that:- Sub-Rule (1) of Rule 23 of the CESTAT Rules states that the parties to the appeal shall not be entitled to produce any additional evidence either oral or documentary. But, if the Tribunal is of the opinion that any documents should be produced or any witness should be examined or any affidavit should be filed to enable it to pass orders or for any sufficient cause or if the Adjudicating Authority or Appellate or Revisional Authority has decided the case without giving sufficient opportunity to a party to adduce evidence, the Tribunal may, for reasons to be recorded, allow such documents to be produced or witnesses to be examined or affidavit to be filed. The Tribunal was justified in remanding the matter to the Adjudicating Authority to consider the evidence, which may be produced by the assessee. The substantial questions of law are answered against the Revenue and in favour of the assessee.
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2018 (12) TMI 1178
Clandestine removal - bazar scrap - the entire case of the Revenue and the Adjudicating Authority while holding against the main appellant is on statements recorded of individuals, it is also recorded that corroborative evidence documentation on which defence for availing CENVAT credit was not produced - Held that:- The Adjudicating Authority has not brought on record in the findings portion, how he has come to a conclusion that there were purchases of bazar scrap and the same was unaccounted; there is nothing on record to indicate the investigation was taken up with scrap dealers - there seems to be no evidence in any form to indicate purchases of unaccounted bazar scrap. Registration number of vehicle mentioned - Held that:- The document indicated was of a Bajaj pulsar motor cycle, the Lorry/Trailer Numbers are specifically mentioned does indicate so, it is not proved beyond doubt that the vehicle number of Bajaj Pulsar was mentioned intentionally on behest of main appellant. Further it can be noticed that the main appellant was taking a consistent stand before the lower authorities they had religiously recorded the receipts and consumption of imported goods in the statutory of books and cleared manufactured products on payment of appropriate duty. The details as given by main appellants in form of RG-23A part I&II, RGI etc., are not controverted by the Adjudicating Authority in the findings (which are reproduced herein above) but pleas were dismissed by recording that the main appellant had not produced evidence of receipt of materials in their factory. The main appellant’s contention that they had manufactured final products and cleared the same during the period in question remains uncontroverted. As regards the RG-23 part I& II and statutory books - Held that:- This position is unchallenged, it can be noted that same were maintained and produced before audit parties during scrutiny of records, on various dates for the period in question. If that be so and there being no adverse observation in the various audit report, as to there may be a case of non-receipt of inputs, entire case of the revenue is based on the statements will fall under its own weight as during cross examination the individuals have denied to have made the statements, which would mean that there is lack of cogent evidences. On this ground itself the entire demand fails. CENVAT Credit - CVD paid on the Bills of entry was availed without receipt of inputs - Held that:- The individuals who were handling business activity of the main appellant i.e., Shri PR Bhandari, Shri U.M. Bhandari, Shri Virendra and Shri Surendra Bhandari, had not given any statement which is inculpatory in nature to indicate CENVAT credit was availed without receipt of any materials. In the absence of any corroborative evidences, it has to be held that the Revenue has not been able to prove that CENVAT credit of the CVD paid on the Bills of entry was availed without receipt of inputs. Demands confirmed on letter written by Concor Corporation that there was receipt of imported goods at Turbhe and transported to place other than Hyderabad - main appellant had been seeking cross examination of the officials, which was declined by the Adjudicating Authority - Held that:- It is settled law that no reliance can be placed on a document which is not tested in cross examination if specifically sought. At the same time, the Adjudicating Authority should be extended an opportunity to consider the plea of cross examination of the individuals from Concor Corporation - appeal allowed by way of remand. Penalties also cannot be sustained. Appeal disposed off.
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2018 (12) TMI 1177
CENVAT Credit - input services - parcel services which were utilised for exports beyond the place of removal - Held that:- Identical issue came up before the Bench of the Tribunal in the case of CCE vs. Imperial Auto Industries [2017 (4) TMI 1048 - CESTAT CHANDIGARH], where it was held that credit on courier and transportation charges to the respondent for transportation of the goods to the foreign buyer premises allowed - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1176
Refund of unutilized CENVAT Credit - inputs/capital goods - manufacture of Rectified Spirit/Denatured Spirit and Fusel Oil - rule 5 of CCR - Held that:- Identical issue came up before Hon’ble High Court of Rajasthan in the case of Welcure Drugs & Pharmaceuticals Limited [2018 (8) TMI 1169 - RAJASTHAN HIGH COURT] wherein their Lordships after analysing all the decisions on the issue and considering the provisions of Rule 5 of CENVAT credit Rules 2004 has held that Tribunal is fully justified in ordering refund particularly in the light of the closure of the factory and in the light or the assessee coming out of the Modvat Scheme. Refund allowed - appeal dismissed - decided against Revenue.
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2018 (12) TMI 1175
Liability of excise duty - Goods removed by EOU to domestic tariff area without obtaining permission from the Development Commissioner - Held that:- The duty liability for the period prior to the amendment of the section 3 of the Central Excise Act, 1944 with effect from 11/05/2001, the duty liability on goods not specifically allowed by the Development Commissioner to be cleared to the DTA, would arise under section 3(1) of the Central Excise Act, 1944 and not under the proviso to section 3(1) of the Central Excise Act, 1944 - appeal dismissed - decided against Revenue.
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2018 (12) TMI 1174
Refund of Education Cess and Secondary & Higher Education Cess paid from PLA - area based exemption under notification 39/01-CE dated 31/07/2001, availed - Held that:- Issue decided in the case of SRD Nutrients Pvt. Ltd. Vs. CCE [2017 (11) TMI 655 - SUPREME COURT OF INDIA] - appellant is entitled for the refund of Education Cess and Secondary & Higher Education Cess under N/N. 39/01-CE - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1173
Penalty - CENVAT Credit - common input services for both manufacturing and trading activities - no separate accountal of utilization - rule 6 of CENVAT Credit Rules, 2004 - Held that:- In view of the consistent stand of the Tribunal on the test of evidence for pre-supposing intent to evade duty, the circumstances pertaining to impugned availment of credit of tax paid on input services used for exempted activities, such as trading, in the various decisions cited by Learned Counsel and the specific circumstances in which the High Courts and Hon’ble Supreme Court has enforced the penal provisions, we set aside the penalty imposed in the impugned order - appeal allowed.
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2018 (12) TMI 1172
CENVAT Credit - duty paid on inputs - captively consumed ‘sugar syrup’ - intermediate goods - Held that:- The contention of the appellant that ‘sugar syrup’ produced by them does not meet these requirements, owing to less than adequate ‘fructose’ content, is backed by a test report which is not controverted by the lower authorities - The finding of ‘sugar syrup’ having shelf-life and, thereby, becoming excisable is not founded on a proper appreciation of the impugned product. In the absence of any test report to contradict the ‘fructose’ content in the ‘sugar syrup’ produced by the appellant, it is not sufficient reasons found to consider the impugned goods to be excisable within the meaning of section 2(d) of Central Excise Act, 1944 - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1171
Rectification by way of corrigendum - circular no. 502/68/99-CX dated 16th December 1999 - Held that:- The demand of duty that has been confirmed is limited to the period from 16th December 1998 to 31st December 1998 with the remaining demand not confirmed. All that corrigendum has done is to clarify that conclusion instead of leaving it to inference owing to a specific reference in the operative portion of the impugned order. As the impugned order has rendered a finding on non-leviability of the duty for the period from January 1999 to January 2000 which is the subject-matter of show cause notice dated 28th April 2000, it cannot be said that the corrigendum was anything more than correction of mere clerical mistake - appeal dismissed - decided against Revenue.
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2018 (12) TMI 1170
CENVAT Credit - inputs utilised in by-products/waste products - circular no. B-4/7/2000-TRU dated 3 April 2000 - Held that:- There was no cause to examine the applicability of circular no. B-4/7/2000-TRU dated 3 April 2000 in which Central Board of Excise & Customs has negated the scope for invoking exclusion from eligibility for CENVAT credit merely because the inputs had been utilised in waste or by-products. As the show cause notices in the impugned proceedings, except for the one pertaining to September 1998, had sought to invoke the demands by disputing the claim of the assessee that ‘lean gas’ is a by-product, it was incumbent upon the original authority to examine that as a prerequisite for determination of liability - the validity of the claim of central excise authorities that liability should be confirmed. The original authority is directed to examine the scope of the applicability of the exclusion from rule 6 of CENVAT Credit Rules, 2002 on the ‘lean gas’ claimed to be a by-product in the manufacturing process of the respondent - appeal allowed by way of remand.
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2018 (12) TMI 1169
Refund of reversed CENVAT credit - time limitation - unjust enrichment - Held that:- The payment was made lastly in February, 2011 without protest and refund claim was filed on 22.06.2017. But such payment being made at the insistence of the Department cannot be considered as time barred and provisions of Section 11B are not applicable in the present case - However, he has not dealt with Section 11B explanation (EC) whereby the period of one year should be computed from the date of judgment decree, order or direction of the Appellate Tribunal. This being not challenged before the Commissioner, no finding is required in this aspect that refund was filed within the prescribed period of limitation. Unjust enrichment - Held that:- It can be noticed that referring to the Balance Sheet of 2005-06 & 2006-07 and for the financial year of 2015-16 & 2016-17 the Adjudicating Authority has given his findings at para 27 that the appellant had not shown the amount of refund claim of ₹ 1,66,600/- as receivable amount in their Balance Sheet and the Chartered Accountant has not certified that the said amount has been shown in the Balance Sheet to be ‘receivable’. Therefore while holding that doctrine of unjust enrichment is applicable to all the cases of refund irrespective of the amount as refund of duty or otherwise - learned Commissioner (Appeals) has accepted the Chartered Accountant certificate as a piece of evidence to the extent that incidence of tax has not been passed on directly to any other person and in respect of indirect passing of such incidence of duty, his logic was that the amount has been booked as expenditure in the books of account and not as receivable that would clearly establish that the amount has been absorbed in the costing of final products. This finding appears to be erroneous. There is no hesitation to hold that rejection of refund claim of the appellant, which it is entitled to get by virtue as the order of this Tribunal, on the ground of unjust enrichment without any iota of proof of such unjust enrichment is erroneous and is not infirmity to the law - appeal allowed.
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2018 (12) TMI 1168
Imposition of oil cess and National Calamity Contingent Duty (NCCD), education cess(EC), secondary and higher secondary education cess(SHE) - Condensate which emerges out during the processing of natural gas in their gas plant - Held that:- The oil cess in terms of Section 15 of OIDA, is required to be collected as duty of excise as per the rate the specified item in the schedule. As per the Act the provision of Central Excise and Salt Act, 1944 and Rules made there under, including those relating to refunds and exemption from duty, cess, as far as may be, applied in relation to levy and collection of duty of excise leviable under this Section and for this the provision of that Act shall have affect as if that Act provided for the levy of duty of Excise on all items specified in the schedule. It is evident that condensate is obtained and received from natural gas processing plant as a by-product where the manufacturing of the aforesaid condensate was never intended, thus this question of classification and payment of cess in the form of duty of excise is not leviable although the Adjudicating Authority has referred to Section 2 (f) and 2 (d) of Central Excise Act to claim of imposition of oil cess on the condensate as a manufactured product. Time limitation - Held that:- In this case the Show Cause Notice is issued under the provisions of Section 11A(1) of the Act thus the demand is time barred as no extended period of limitation has been invoked in the Show Cause Notice dated 25.3.2015. The Show Cause Notice invoked the provisions of Section 11 A(1) of Central Excise Act, 1944 read with Section 15 of Oil Industries Development Act - the demand is time barred. The oil cess is not leviable on the condensate and under OIDA either on merits or also on limitation - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1167
CENVAT Credit - input services - Rent-a-Cab Services - Water Treatment - Gardening Service - period pre and post 01.04.2011. Rent-a-Cab services - Held that:- For the post amendment period i.e. after 01.04.2011, the above definition was amended to specifically exclude Rent-a-Cab Service, and includes services which are ‚used by a manufacturer, whether directly or indirectly, in or in relation to manufacture of final product and clearance of final products up to the place of removal‛ - Commissioner (Appeals) has rightly disallowed the Credit on Rent-a-Cab Services for the period from December 2011 to October 2012 and the same does not call for any interference - Demand on Rent-a-Cab Service for the period from April 2008 to March 2009 is set aside - Demand on Rent-a-Cab Service for the period from December 2011 to October 2012 is upheld with interest thereon. Water Treatment Service - Held that:- The same is utilized by the appellant as per the guidelines or norms of PCB according to which establishment of Effluent Treatment Plant in the factory is a statutory requirement for the treatment of polluted water - credit allowed. Garden Maintenance Services - Held that:- The same is required as per the guidelines of the PCB for the purpose of a better work atmosphere - credit cannot be denied. Appeal allowed in part.
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2018 (12) TMI 1166
Valuation - inclusion of hundi charges collected by the appellant from their customers in assessable value - Held that:- Tribunal in the case of Collector of Central Excise vs. Shree Bhawani Cotton Mills & Industries Ltd. [1985 (1) TMI 214 - CEGAT, NEW DELHI] has held that bank commission and hundi commission and interest payable to the bank in the account of the customers cannot be included in the assessable value - demand set aside. CENVAT Credit - various input services - Held that:- The services are held to be eligible for credit as decided in various decisions - credit of all services allowed except vehicle repair & maintenance and Internet charges. Appeal allowed in part.
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2018 (12) TMI 1165
Recovery of cash refund (erroneous refund) - area based exemption under N/N. 56/2002-CE dated 14.11.2002 availed - Held that:- Similar issue has been dealt by this Tribunal in the case of S.B. Aromatics vs. CCE & ST, Jammu & Kashmir [2018 (11) TMI 830 - CESTAT CHANDIGARH], where it was held that duty on account of erroneous refund cannot be demanded on the allegation that the appellant was not a manufacturer - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1164
CENVAT Credit - inputs in the form of HR/CR Coils and sheets - Held that:- Such inputs were used by the appellants in the fabrication of body on the chassis supplied by M/s Tata Motors and other customers. For fabrication of body, the supplier, M/s Tata Motors, had supplied the design and drawing to the appellants. This also contained a bill of materials required for the fabrication of such body - The investigation led to the conclusion that the appellants have shown consumption of materials in excess of materials as per bill of materials supplied by Tata Motors. This became the basis for the prima-facie conclusion of Revenue that the appellant has shown as consumed more materials than what was required for fabrication of chassis. Whether the Department is justified in ordering reversal of cenvat credit for inputs to the tune 1685.696 MT? - Held that:- As per the Scheme of the Cenvat Credit Rules, 2004, the credit on inputs is eligible in respect of goods used in the factory of the manufacturer of final product. It is not in dispute that the HR/CR sheets are inputs, which are required in the fabrication of body in the appellant’s factory. The credit also have been availed on the basis of invoices for which the payments have been made through proper Banking Channels. The investigation undertaken at the supplier’s end, has not brought on record any solid evidence to establish that the inputs were never received in the appellants’ factory. It is nobody’s case that any part of the inputs have been diverted clandestinely outside without use in the factory for manufacture. In view of the above, it cannot be concluded that the appellant has irregularly availed credit on inputs without use of the same in the manufacture. Two invoices for a total quantity of about 76 MT - Held that:- The credit for the same has since been reversed inasmuch as the material has been received/returned. Revenue is not justified in ordering reversal of cenvat credit - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1163
Valuation - cement - clearances to Deputy Commissioner, Singhbhum, Jamshedpur in 50 kg bags on which RSP of ₹ 189 was fixed - N/N. 4/2006-CE dated 01.03.2006 - Held that:- Even though RSP has been embossed on such bags, it is obvious that such clearances do not fall in the category of retail sale, but are in the nature of sale to institutional customers - Notification No.4/2006 specifically provides that clearances made in those cases where RSPs were not required to be declared under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 are to be charged to duty at the rate as in the case of goods cleared in other than packaged form. Such goods are chargeable @400 per MT in terms of Sl. No.1C of the Notification ibid - there is no justification to charge excise duty @₹ 600 per MT (tariff rate) - the differential duty demand restricted to the difference between ₹ 400 per MT (as per 1C) and ₹ 350 per MT (as per 1A). Cement to retail customers in 50 kg bags on which RSP was fixed - Held that:- There is no justification for charging excise duty at tariff rate in view of the fact that different RSPs have been affixed only for clearances to different areas. But there is only one RSP on a single package and there was no case of two or more RSPs printed on any single package. Consequently the mischief of Explanation III of the Notification will not be incurred. Since duty is already paid @12% of the RSP, the demand for differential duty made in the impugned order is set aside, in respect of clearances to retail customers. Penalty - Held that:- The issue of the present case is a question of interpretation of the Notification No.4/2006. It cannot be said that the appellant had any malafide intention and hence there is no justification for imposition of any penalty - penalty set aside. Appeal allowed in part.
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2018 (12) TMI 1159
CENVAT Credit - input services - rent-a-cab service - period from January 2011 to March 2013 - Held that:- The appellant has not produced any evidence to establish that the motor vehicles are capital goods for the service provider for the period from 1.4.2011 to 31.3.2013, the credit is ineligible and the demand for the said period is therefore upheld. Penalties - Held that:- The issue is interpretational and also transitional period, penalty imposed are unjustified. Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (12) TMI 1162
Classification of goods - multi function printers - classifiable under Entry 84.71 of the Notification No. VAT-1505/CR116/Taxation-1 dated 1st April, 2005 or not - MVAT Act - Held that:- Multi-functional printers are modular units which connect to the computer/computer network and are used in automation activity of printing. The heart of the multi-functional printers consists of a printing mechanism to perform the basic function of printing. In addition to the primary function of printing, other incidental functions performed by the multi-functional printers are scanning and copying or scanning, copying and fax. However, the essential function of the product is nothing but printing - A multi-functional printer is sold and marketed as a printer with additional capabilities such as copy, fax and scan. Thus, the understanding in the commercial parlance and of the end customer/user is that of a printer, with supplementary features and capabilities. Rather than having to invest in four separate machines of printer, scanner, fax and copier, the user can obtain all these capabilities by purchasing a multi-functional printer. The printers sold by the appellant are classifiable under Entry 84.71 of the IT Products Notification as “laser jet printers”. The specific entry must prevail over the residuary entry and hence, the appellant’s goods cannot be classified under the residuary entry. The appellant’s products have been rightly classified as attracting the rate of duty at 12.5% - substantial questions of law concurrently answered in favour of the Revenue and against the appellant-assessee - appeal dismissed.
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2018 (12) TMI 1161
Time limitation for making assessment - service of order - Levy of entry tax - suppressed purchasers of sugar brought side from local area - UP VAT Act - Held that:- There is no explanation in the counter affidavit as to why the modes of service of the orders as prescribed under Rule 72 of the U.P. VAT Rules was not observed for serving of the order by the Department. There being no explanation in the counter affidavit for nonobserving any of the modes of service of order as prescribed under Rules and the Circulars the irresistible conclusion is that the order was antedated - the impugned orders for Assessment Year 2013-14 U.P. and Assessment Year 2013-14 Entry Tax passed by the Deputy Commissioner, Commercial Tax, Sector-8, Meerut (respondent no. 1) both dated 28.10.2016 and served on 13.9.2017 is quashed as being beyond the prescribed period of limitation provided under Section 29 sub-section 6 of the U.P. Value Added Tax Act - petition allowed.
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Indian Laws
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2018 (12) TMI 1192
Dishonor of cheques - complaint u/s 138 of the Negotiable Instruments Act, 1881 - Maintainability of summary suit against LRs - Time Limitation - difference in amount claimed in the suit and amount due - Held that:- The pleadings in the present suits are clear to the effect that ₹ 3 crores is claimed as the principal amount and ₹ 84 lacs is claimed towards the interest from 1st April, 2016 till the date of filing of the suit @12% per annum. The pleading is clear and categorical. It brooks no ambiguity. A reading of the said pleading shows that it is in accordance with the instrument issued by Late Mr. Dhingra i.e. a cheque of ₹ 3 crores. This, objection is also not tenable - The leave to defend, therefore, does not raise any triable or valid defence. Limitation - Held that:- The question of limitation is not being gone into as the summons for judgments were served on the Defendants on 6th November, 2018 and first filing of the leave to defend was on 12th November, 2018. Though, there was a refiling of the said application, the date of filing of the said application would have to be construed as 12th November, 2018. The objection of limitation is, thus, rejected. The suit is thus decreed.
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2018 (12) TMI 1191
Revocation of leave - non-realisation of dues in respect of invoices raised for supplies made by the plaintiff to the defendants under purchase orders - Held that:- There is no doubt that the agreement between the plaintiff and the defendant for sale and purchase of goods was entirely contemplated to be performed outside the jurisdiction of this Court. The purchase orders issued by the defendant/buyer are forum-neutral although they were addressed to the plaintiff at Chhatisgarh and Maharashtra where they were also received. The invoices raised by the plaintiff for supply of the goods in question contained an unambiguous and specific forum selection clause. The choice made by the defendant in inserting the clauses “subject to Raipur jurisdiction only” and “subject to Nagpur jurisdiction only” indicate that the parties had agreed to be subjected only to Courts in these jurisdictions. There is no basis to presume that the parties have given a go-by to the clause conferring exclusive jurisdiction to Raipur and Nagpur - application allowed.
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