TMI Tax Updates - e-Newsletter
December 3, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Supply, movement & delivery of goods from outside taxable territory to outside taxable territory, is not liable to GST u/s 7(5)(a) of IGST

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Articles

1. SUPPLY OF FOOD TO THE EMPLOYEES OF THE UNIT IN ‘SEZ’ IS NOT ZERO RATED SUPPLY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. GST Revenue collection for the month of November 2018 crosses Ninety-Seven Thousand Crore Rupees

2. Frequently Asked Questions on TCS under GST (Updated as on 30.11.2018)

3. Insolvency Professionals to act as Interim Resolution Professionals and Liquidators (Recommendation) (Second) Guidelines, 2018

4. The Indian Economy is on track to maintain a high growth rate in the current global environment

Notifications

Customs

1. 94/2018 - dated 30-11-2018 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg

DGFT

2. 45/2015-2020 - dated 30-11-2018 - FTP

Amendment of import policy of items under HS code 7108 12 00 under ITC (HS), 2017, Schedule - I (Import Policy)

Circulars / Instructions / Orders

DGFT

1. 53/2015-2020 - dated 30-11-2018

Insertion of a new provision under Para 2.103 and amendment in Para 2.104 - reg.

2. 54/2015-2020 - dated 30-11-2018

Inserting new Appendix No.2X in the Appendices and Aayat Niryat Forms of Foreign Trade Policy, 2015-20 - reg.

3. 52/2015-2020 - dated 30-11-2018

Amendment in Appendix 2K of Appendices for Appendices and Aayat Niryat Forms of FTP, 2015 – 20 - reg.

Highlights / Catch Notes

GST

• Goods Delivered Outside India Not Taxable Under IGST Act Section 7(5)(a.

  Case-Laws - AAR : The supply of goods which are moved from a place located outside taxable territory and are delivered at a place outside taxable territory, would not be liable to tax in India under section 7(5)(a) of IGST Act.
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• Dealer Provides Security for Goods u/s 129; Bank Guarantee Ensures Tax and Penalty Coverage Without Goods Penalty.

  Case-Laws - HC : Confiscation of goods - invocation of Section 129 - The dealer has also furnished a security equivalent to the value of the goods. There is, hence, no question of the applicable tax and penalty being not paid, since at any time the bank guarantee could be enforced - the non-production of goods as noticed in the order is not a ground for imposition of penalty
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Income Tax

• Court Examines Transfer Pricing in International Transaction for Distributorship Acquisition, No Income Diversion Found.

  Case-Laws - HC : Transfer pricing - International transaction or not - the present case is a simple one where the money was routed through the AE by the assessee for the purpose of acquisition of distributorship. - This transaction did not result into diversion of income of the assessee to its AE.
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• Taxpayer Eligible for Deductions on Additional Income from Voluntary Adjustments and Transfer Pricing Provisions.

  Case-Laws - AT : The assessee is entitled to claim deduction u/s 10A/ u/s 10AA on additional income offered on account of suo moto adjustment and transfer pricing provisions.
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• Assessee Permitted to Classify Infrastructure Upgrade Costs in Government Lab as Revenue Expenditure.

  Case-Laws - HC : Assessee is entitled to treat the expenses, incurred by them for upgrading of infrastructure in the government laboratory, as per the directions of the Government, which owns the Corporation, as revenue expenditure.
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• Penalties for TDS Non-deduction u/s 271C Require Proof of Willful Default by Assessee per Section 194J.

  Case-Laws - AT : Penalty u/s 271C - non-deduction of TDS u/s 194J - for levy of the penalty u/s 271C the learned adjudicating authority has to show contumacious conduct on the part of the assessee.
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• Depreciation Claim Denied: Not Raised Due to Negligence and Absent from Profit and Loss Account During Assessment.

  Case-Laws - HC : Depreciation of leased assets - since the claim was not raised due to sheer negligence and it had not even figured in the profit and loss account. It was not the subject matter of assessment - Claim not allowed.
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• Deduction Denied: Payments to GVF Lacked Evidence of Marketable Trademark Value, Disallowing Expenses u/s 37.

  Case-Laws - HC : Claim of deduction u/s. 37 in respect of amounts paid to GVF - there is nothing on record to suggest that trademark in question, had any marketable value and that the Assessee used said trademark for purpose of its products - Expenses not allowed.
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Customs

• Tariff Values Updated for Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold, and Silver under Customs Regulations.

  Notifications : Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg
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• Crude Oil Export Rights: Legal Procedure and Government Decisions on Permissions Explained Under Customs Regulations.

  Case-Laws - HC : Entitlement/right to export - Crude Oil- Permissions/approvals/authorisations for direct export or permission/facilitation for canalised export through the third respondent - the reasons given by the Central Government cannot be characterized as arbitrary or unreasonable
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• Exemption Granted: Appellant Retains Title to Goods, Files Bills of Entry on Reimport, Conditions Examined.

  Case-Laws - AT : Scope of the exemption - Interpretation of conditions imposed - The goods title in the goods continued to remain vested with the appellant as is evident from the facts when the goods were reimported, the Bills of Entry were filed by the appellant - Benefit of exemption allowed.
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• Appellant's Factory Closed After Goods Leak Due to Denied Re-export; Penalty Imposed but Liability Remains High.

  Case-Laws - HC : After the re-export was declined, the goods stored in containers in the premises of the appellant leaked out and the appellant's factory itself is closed down - The penalty imposed in lieu of confiscation is in fact a flea bite on the appellant, who was liable to confiscation of the goods imported.
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DGFT

• DGFT amends Appendix 2K of Foreign Trade Policy 2015-2020 to streamline processes and enhance compliance.

  Circulars : Amendment in Appendix 2K of Appendices for Appendices and Aayat Niryat Forms of FTP, 2015 – 20 - reg.
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• DGFT Circular Introduces New Provision in Paragraph 2.103 and Amends Paragraph 2.104 in Trade Regulations.

  Circulars : Insertion of a new provision under Para 2.103 and amendment in Para 2.104 - reg.
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• DGFT adds Appendix No.2X to Foreign Trade Policy 2015-20, streamlining procedures and enhancing compliance.

  Circulars : Inserting new Appendix No.2X in the Appendices and Aayat Niryat Forms of Foreign Trade Policy, 2015-20 - reg.
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• DGFT Amends Import Policy for HS Code 7108 12 00 to Align with Current International Trade Standards.

  Notifications : Amendment of import policy of items under HS code 7108 12 00 under ITC (HS), 2017, Schedule - I (Import Policy)
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Service Tax

• Appellant's Fact Suppression Allegations Unfounded; Discrepancy Due to Wrong Excise Code, Not Intentional Concealment.

  Case-Laws - AT : The allegations of the Department about suppression of facts on part of the appellant with the mention that the mistake came to the notice only at the time of Audit is not sustainable specially in a case where the duty has been paid, however, to a wrong Excise Code.
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• Railways' VAT Deduction on Composition Basis for Goods Supply Excluded from Works Contract Definition; Service Tax Demand Nullified.

  Case-Laws - AT : The Railways had deducted VAT on composition basis from their bills towards payment of VAT component on the goods supplied by them - the works contract in respect of Railways was excluded from the definition - Demand of service tax set aside.
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• Appellant Entitled to CENVAT Credit; Service Tax Consistently Collected Under Cargo Handling Services Without Reclassification.

  Case-Laws - AT : CENVAT Credit - when it is undisputed that revenue is collecting service tax from the appellant under cargo handling services and having not re-classified the services, they cannot now turn around and say that the services rendered by the appellant could not fall under the category of cargo handling services for denying for availment of legitimate Cenvat Credit
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Central Excise

• Appellant Permitted to Deduct Sales Tax from Aerated Water Price Under Central Excise Valuation Rules.

  Case-Laws - AT : Valuation - Deduction of the sale tax - on account of sales tax which is of inclusive of the price, the appellant/assessee is entitled for deduction from the selling price of aerated water in bottles as well as bag-in-box.
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• Denial of CENVAT Credit for 100% EOU on Debonding Contradicts CENVAT Credit Rules, 2004 Objectives for Export Facilitation.

  Case-Laws - AT : Carry forward of accumulated credit on Debonding of units - 100% EOU - Denial of CENVAT credit accumulated from duties discharged on procurements employed in exported goods would, therefore, load the burden on the exporter which defeats the very premise that is contained in the CENVAT Credit Rules, 2004
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• Exemption for Vulcanised Rubber Tubes: Auto Parts Don't Need Chapter 87 Classification to Qualify Under Tariff.

  Case-Laws - AT : Benefit of exemption - vulcanised rubber tubes - it is evident that as far as this notification is concerned, for parts of automobiles to be covered, they need not fall under chapter 87 and they can fall under any heading of the Tariff.
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• Refund Claim for Duties on Products Pre-Exemption Allowed; No Need to Claim Before Factory Removal.

  Case-Laws - AT : Refund claim of duty paid - duty were paid on the products prior to exemption - There is nothing in the notification which requires assessee to claim the benefit of this notification prior to the removal of goods from the factory.
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Case Laws:

• GST

• 2018 (12) TMI 69
  Revision of price under bid in view of the change in the tax structure on introduction of GST - It is the case on behalf of the petitioners that at the relevant time when they submitted the bids and quoted the rates which came to be accepted, the GST / CGST was not in existence which came to be introduced subsequently and therefore, in view of the above, they may be permitted to change the rates. Whether the respondents are required to be directed to accept the request of the petitioner of price revision in view of the introduction of the GST? Held that:- As per Clause 49 of the tender document the claim of price revision of any finished goods under any pretext or reason, including the revision of duty / excise / cost shall not be allowed at any stage after the last date of submission of the tenders. Similar are the conditions of the rate contracts. Under the circumstances when the rate contract was inclusive of the duties / taxes / levies and there is no clause for variation / price revision in case of revision of any tax, the petitioner shall not be entitled to change the rate contract / revision of price on any ground which otherwise is not permissible as per the terms and conditions of the tender document / rate contracts. Merely because the VAT / excise duty has been abolished, which was there at the relevant time when the prices were quoted and the rate contracts were executed and thereafter has been substituted by the GST, the petitioners cannot be permitted to change the rate contract / rates and cannot be permitted to have the price revision. Otherwise the same shall be contrary to the terms and conditions of the relevant tender documents / rate contracts. At the relevant time VAT liability was 5% and the excise duty liability was 2%. As per the GST, now the total tax liability would be 12% - Mrely because now the VAT and excise duty have been deleted and instead the same is substituted by GST which may be at 12%, the petitioners cannot claim the price revision on the aforesaid ground. The grant of any relief as prayed in the present petitions would tantamount to varying terms and conditions of the tender document / rate contracts which in exercise of powers under Article 226 of the Constitution of India shall not be permissible - In the present case, as such the liability to pay GST under the GST / CGST Act is upon the supplier. As observed hereinabove the price quoted and the rate contract was inclusive of all the levies and taxes. Therefore, the petitioners shall not be entitled to the revision of price as sought. In the present case the decision taken by the respondent No.2 GMSCL in not permitting the price revision is after due application of mind and even after considering the opinion of the Finance Department, State of Gujarat and a conscious decision has been taken by the Committee which is neither perverse nor arbitrary and/or contrary to the terms and conditions of the tender documents / rate contracts. Therefore also, the impugned decision not suffering from any malafides and/or arbitrariness, the same is not required to be quashed and set aside in exercise of powers under Article 226 of the Constitution of India. Petition fails and is dismissed.

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• 2018 (12) TMI 68
  Detention of goods with vehicle - Detention on the ground that the goods were not accompanied by the E-way bill-01 - Held that:- The E-way bill under the UPGST Act has been downloaded by the petitioner, much before the detention and seizure of the goods and the vehicle, disclosing all the necessary informations - there is no irregularity in the present transaction and, therefore, the seizure order as well as penalty notice dated 28. 03. 2018 issued under Sections 129(1) and 129 (3) of the Act as well as the consequential proceedings are hereby set aside - petition allowed.

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• 2018 (12) TMI 67
  Levy of tax - the supply of goods which are moved from a place located outside taxable territory and are delivered at a place outside taxable territory - section 7(5)(a) of IGST Act - input tax credit - recipient of goods - inter-state supply - Place of supply of goods - territorial jurisdiction. Held that:- It is clear that the applicant would be purchasing goods from Jotun Norway on the bas1S of purchase orders received from their customer in India and the said goods would be delivered by JN from their Norway place to the ship/vessel of the customer which is also in non-taxable territory i.e. outside India. The order received by the applicant from their customer in India and the order placed to Jotun, Norway are back to back orders. Thus it is seen that the goods are delivered by JN from a place outside the taxable territory of India to the customer s vessel which is also the taxable territory of India. This transaction is similar to selling of goods on High Seas Sale since in both the cases the goods purchased do not cross the customs frontiers of India. The supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce - there is no doubt that the goods of the applicant would be imported goods if they are brought from outside the country into India and it is clear that when the said goods are delivered/supplied from a place outside India to a place outside India, these goods have not crossed the customs frontiers of India Thus clearly the transaction in these goods are in the nature of inter-state supply as per Section 7(2) of the IGST Act. The subject transaction in question is in the nature of inter-state sales, the liability to tax in respect of these goods would be as per Section 5 of the IGST Act - the integrated tax on goods imported into India is to be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975 and Section 12 of the Customs Act, 1962 and the same is to be levied and collected at the time of import into India. The goods are considered to be imported into India only after they clear the customs frontier after compliance of applicable procedures and payment of duty as applicable. In case of goods supplied on an out an out basis as is in the present case, there is no levy till the time of their customs clearance in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act. In view of this the import goods sold from and to a non-taxable territory, though they are clearly in the nature of inter-state supply would come in the category of exempt supply as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act - Thus it is very clear that the goods sold in the subject transaction are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975. Ruling:- The supply of goods which are moved from a place located outside taxable territory and are delivered at a place outside taxable territory, would not be liable to tax in India under section 7(5)(a) of IGST Act.

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• 2018 (12) TMI 66
  Levy of penalty - Confiscation of goods - invocation of Section 129 of the Integrated Goods and Services Tax Act, 2017 - appellant obtained provisional release of the goods by furnishing bank guarantee for the applicable tax and penalty as spoken of under Section 129 of the Integrated Goods and Services Tax Act, 2017, as also bond for production of the goods and furnishing security for the value of the goods as spoken of under Rule 140(2) of the Central Goods and Services Tax Rules, 2017. Held that:- We notice from Section 129 that the confiscation proceedings under Section 130 would be possible only if the dealer fails to pay the applicable tax and penalty imposed by an order under Section 129(3). Confiscation is hence a coercive measure to ensure payment of the tax and penalty levied on a delinquent dealer; who otherwise is at threat of loosing the goods itself. Confiscation is not an automatic consequence ensuing from detention and an order passed under Section 129(3), of there being a contravention of the provisions of the Act or rules made thereunder - In the present case, the dealer was allowed release of the goods by furnishing bank guarantee for the tax and penalty. The dealer has also furnished a security equivalent to the value of the goods. There is, hence, no question of the applicable tax and penalty being not paid, since at any time the bank guarantee could be enforced. Penalty - Held that:- The production of goods under Rule 140 is only for invocation of confiscation proceedings, which would not be necessary if the security equivalent to the value of the goods is furnished under Rule 140, in case of detention under Section 129 - the non-production of goods as noticed in the order is not a ground for imposition of penalty. Appeal disposed off.

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• 2018 (12) TMI 65
  Release of seized goods - submission is that there was no violation of any provision of the Act to justify the seizure of the goods - Held that:- Sri Tripathi may seek instructions and file counter affidavit within three weeks. One week thereafter for filing rejoinder affidavit. List for admission/final disposal on the expiry of the aforesaid period.

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• Income Tax

• 2018 (12) TMI 64
  Entitlement to 50% of the additional depreciation under Section 32(1) (iia) - whether when 50% of the additional depreciation is claimed by the Assessee in a particular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year? - Tribunal allowed claim - Held that:- The third proviso, now recognizes the right of an Assessee to claim the remaining 50% depreciation in subsequent year in a case where machinery and plant being acquired and put to use for less than 180 days in the previous year, the depreciation was restricted to 50%. Such a situation as in the present case, was considered by the Division Bench of the Madras High Court in Commissioner of Income Tax v/s. Shri T. P. Textiles Pvt. Ltd. [2017 (3) TMI 739 - MADRAS HIGH COURT] the Court referred to the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., [2016 (1) TMI 81 - KARNATAKA HIGH COURT] as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 Karnataka High Court in Rittal India Pvt., Ltd.,(supra) even without the aid of the statutory amendment held that remaining 50% unclaimed depreciation would be available to the Assessee in the succeeding Assessment Year. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T. P. Textiles Pvt. Ltd., (supra) ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also. No reason to take view different from two High Courts, examining the situation at considerable length. In the result, no question of law arises. - Decided against revenue

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• 2018 (12) TMI 63
  Entitled to deduction u/s. 80P(2)(a)(i) - Assessee are primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 - Held that:- The Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). TDS u/s 194A - Disallowance of interest u/s 40(a)(ia) - TDS liability - Held that:- The issue is covered in favour of the assessee by the ITAT order in case of Kadachira Service Co-op Bank Ltd. [2013 (2) TMI 208 - ITAT COCHIN] as held for the purpose of understanding the cooperative society, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative Societies Act. Therefore, the Kerala High Court found that the co-operative societies are exempt from provisions of section 194A - addition u/s 40(a)(ia) is deleted - Decided in favour of assessee.

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• 2018 (12) TMI 62
  Disallowance of interest - assessee claimed net deduction on account of interest - Held that:- The Hon’ble Punjab & Haryana High Court in CIT Vs. Bhupindra Flour Mills (P) Ltd. (2012 (6) TMI 288 - PUNJAB AND HARYANA HIGH COURT) has held that an amount spent by the assessee on demolition of structure which had caught fire and major repair of the premises during the period when the business was in existence, is admissible as a revenue expenditure. In view of the above legal position, we are satisfied that the CIT(A) was justified in deleting the addition made by the AO by disallowing the net interest paid. - Decided in favour of assessee Addition of insurance claim received - nature of income - Held that:- The Mumbai Bench of the Tribunal in J.R. Enterprises (2008 (6) TMI 604 - ITAT MUMBAI) has held that the provisions of section 45(1A) of the Act are inapplicable because of the receipt of insurance claim of Rs. 1.57 crore against the actual expenditure incurred of Rs. 3.82 crore. The Chennai Bench of the Tribunal in Chemfab Alkalis Ltd. (2012 (8) TMI 1142 - ITAT CHENNAI) also considered a similar situation in which the amount of insurance claim was less than the amount of actual expenditure incurred on reconstruction/ renovation and it was held that no short term capital gain u/s. 45(1A) of the Act can be charged under such circumstances. Validity of assessment - no notice u/s.143(2) was validly served - Held that:- We are confronted with a situation in which the assessee did raise objection before the AO during the course of assessment proceedings itself that the notice was not properly served upon him. However, the AR of the assessee appearing before the AO, gave his ‘no objection’ for furthering the assessment proceedings. When the second limb of the ld. AR not objecting to the continuation of assessment proceedings despite service of notice on the assessee’s manager is considered in conjunction with the first limb of the assessee initially objecting to the service of notice, the inference which follows is that the assessee did raise objection initially but withdrew the same before the AO. In such a scenario, the initial objection stood withdrawn by the later ‘no objection’ tendered before the completion of the assessment, making it a case of not objecting to the valid service of notice before the AO. Thus, the proviso to section 292BB of the Act, which was triggered by raising an initial objection before the AO, was given a goby and got set to rest by the ld. AR not objecting to such objection in terms of order sheet entry dated 13-08-2012. Once the proviso is held to be inapplicable, the main provision of section 292BB gets magnetized, which deems proper service of notice on the assessee appearing before the AO in the assessment proceedings, thereby debarring it from raising any objection of improper service of notice before any proceedings under the Act, including the Tribunal. Power of attorney - Once an assessee empowers his authorised representative to appear before the AO or for that purpose, any other appellate court in the income tax proceedings and undertakes to ratify his acts, there is no need to ignore any concession made by the ld. Authorised representative and personally call upon the assessee to make concession in every case. The ld. AR could not draw our attention towards any decision under the income-tax proceedings in which the concession given by the ld. AR was successfully challenged by the assessee before the higher court on the ground that such concession by the ld. AR was invalid. In view of the foregoing discussion, we are of the considered opinion that there is no merit in the grounds raised by the assessee in this regard, which are hereby dismissed.

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• 2018 (12) TMI 61
  Transfer pricing - International transaction or not - money routed through the AE by the assessee for the purpose of acquisition of distributorship - Held that:- Explanation to Section 92B clarifies certain doubts. As per clause (c) of this explanation, capital financing including any type of long-term or short-term borrowings, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising in the course of business would be included within the expression “international transaction”. Revenue had heavily relied on this explanation. Having regard to the nature of entire arrangement and the different transactions, noted above, in our opinion, the said explanation would not cover the present situation. As noted, the present case is a simple one where the money was routed through the AE by the assessee for the purpose of acquisition of distributorship. This is not a case of either financing or landing or advancing of any moneys. The back to back agreements, the contents thereof and most significantly, the fact that neither at the point of payment nor at the point of refund of money, the AE retained the same for any significant period of time, in our opinion, would be crucial. This transaction did not result into diversion of income of the assessee to its AE. The Tribunal, therefore, committed no error - once we come to the conclusion that the transaction did not give rise to the international transaction, the rest of the issues would become academic. Income Tax Appeal dismissed

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• 2018 (12) TMI 60
  Addition of forfeiture of warrants u/s 28(iv) - Held that:- On a plain reading of Section 28 (iv) of the Income Tax Act, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke this provision, the benefit which is received has to be in some other form rather than in the shape of money. If that is because of the remission loan liability as in this case, then, this section would not be attracted. - Decided in favour of the Assessee and against the Revenue Addition u/s 14A - Held that:- Revenue may be correct in pointing out that in the context of present case which concerns the assessment year 2009-10, Rule 8D was already brought in the statute. However, a pre-condition to applicability to Rule 8D is that as per Sub-section 2 of Section 14A, the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of the expenditure in relation to income which does not form part of the total income under the Act. When we find that consistently it is a finding of the fact in case of assessee over a period of time that the assessee had own sufficient funds for making investments in shares, the disallowance of interest expenditure under Section 14A. Tax Appeal dismissed.

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• 2018 (12) TMI 59
  TPA - adjustment of AMP expenditure - international transaction between the taxpayer and its AE with regard to AMP expenses - Held that:- ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. However, if the above decisions of Hon'ble Jurisdictional High Court which is under consideration before the Hon'ble Apex Court is modified or reversed by the Hon'ble Apex Court, then the Assessing Officer would pass the order afresh considering the decision of Hon'ble Apex Court. In those circumstances, he will also allow opportunity of being heard to the assessee.

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• 2018 (12) TMI 58
  Deduction claimed by the assessee u/s 10AA - additional income offered on account of suomoto adjustment and transfer pricing provisions - Held that:- In instant case, the claim made by the assessee is not a fresh claim, it is only an alternate claim and the same is correct claim made by the assessee. The fact that the assessee has carried on the business from the SEZ unit was not disputed by the AO. AO also did not dispute the fact that the profit was related to the new unit established in the VSEZ. The assessee has filed audit report which is placed according to which the entire profit and the turnover was related to the unit located in VSEZ, Rushikonda. Hence, we are of the considered view that merely because of the technical reasons the justice should not suffer. In the subsequent assessment years, on the same facts, the AO has allowed the deduction u/s 10A of the Act. CIT(A) also confirmed the addition misdirecting himself that the assessee has made the opposite claim. In fact, there was no opposite claim made by the assessee and it was only an alternate claim. Similar issue of alternate claim u/s 10A has come up before the Coordinate Bench of ITAT Pune in the case of Approva Systems (P) Ltd., (2018 (3) TMI 1031 - ITAT PUNE) and the coordinate bench held that the assessee is entitled to claim deduction u/s 10A on additional income offered on account of suomoto adjustment and transfer pricing provisions. Disallowance of expenditure u/s 14A - Held that:- There is no case for disallowance under Rule 8D of IT Rules. The fact that there was no dividend income earned by the assessee is not in dispute. No disallowance is called for in the absence of exempt income. We hold that in the absence of the exempt income, there is no case for making the disallowance u/s 14A of the Act. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.

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• 2018 (12) TMI 57
  Permanent establishment in India - income accrued in India - taxability of service as fees for technical services under India-Singapore DTAA in the absence of Service PE - service fee as taxable as fee for technical services - Held that:- We find that in this AY 2012-13, since the employees of the assessee had visited India for a period of only 2 days on account of Management fee, the pre-condition contained under Article 5(6)(b) of DTA is not satisfied and accordingly the employees of the assessee could not be considered as Service PE in India. Consequently, in the absence of a PE in India, the Management fee would not be subject to tax in India and the question of determining the profits attributable to PE in India would not arise. Since the Service Fee would be taxable as fees for technical services under Article 12(4)(b) of the DTAA, the said services would fall outside the purview of service PE under Article 5(6) of the DTA which provides “6. An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services, other than services referred to in paragraphs 4 and 5 of this Article and technical services as defined in Article 12.” Accordingly, we are of the view that under the provisions of Article 12(2) of the DTAA, the Service Fee would be chargeable to tax at the rate of 10 percent. AO erred in treating the gross receipts of INR 30,18,10,059/- as the profit attributable to the Service PE and ought to have determined the profit clement in the said receipt at 10 percent of the costs or 10 / 110 of the gross receipts of 30,18,10,059/- i.e. INR 2,74,37,278. The assessee filed the Agreement wherein it is specified in Pans 4 and 5 that DDIL shall pay the assessee management fee calculated based on 110% of all direct and indirect costs incurred by the assessee in rendering of the management services" and that all direct and indirect costs incurred for the provision of the services shall be allocated to the Company 'DDIL, based on a formula. We are of the view that the above contention of the assessee needs verification of facts by the AO. Hence, we direct the AO to decide the issue by considering the following: i. The service fee is taxable as fee for technical services in both the years i.e. AY 2012-13 and 2013-14. ii. The management fee for AY 2012-13, being in the nature of business profit under the India-Singapore DTAA is not taxable in India as the assessee does not have a service PE because the condition of article 5(6)(b) of the DTAA is not satisfied for the reason that the no. of days of stay of employees is 2 days only. iii. As regards to AY 20113-14, the management fee earned by assessee, the profit attribute to management service PE as per article 7(1) of India Singapore DTAA can be considered. Both the issues in these appeals of assessee are set aside to the file of the AO to decide in term of the above direction after carrying out verification of facts. Charging of interest 234(b) - Held that:- We find that the assessee is a non-resident and the liability of payment of advance tax is not on the assessee for the reason that the payer has to deduct tax at source under section 195 of the Act at the time of payment. This issue is covered by the decision in the case of DIT (International Taxation) v. NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT). Hence, while computing tax on income the AO will not charge interest under section 234 B of the Act. We direct the AO accordingly.

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• 2018 (12) TMI 56
  Expenses claimed prior to setting up of business - sequence of point of time when the business can be said to have been set up - Held that:- According to Section 3(1) of the Act it is setting up of the business and not the commencement of the business that is to be considered. A business is commenced as soon as an essential activity of that business is started. A business commenced with first purchase of stock in trade, the date when the first sale is made is not material in that respect. Similarly, a manufacturer has to undertake several activities in order to bring to produce financial goods and he commences his business as soon as he undertakes first of such activities. The three circumstances pointed out by the assessee before the CIT(A) viz., receipt of agency commission, travel by directors to explore the possibilities of getting business and taking the premises on lease for the purpose of manufacturing activity would be sufficient to come to the conclusion that business of assessee had been set up during the relevant previous year. Consequently, the assessee would be entitled to claim all the revenue expenses as deduction in computing its total income - The claim made by the assessee for deduction should have been allowed by the revenue authorities. Accordingly direct the AO to allow the deduction. - Decided in favour of assessee

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• 2018 (12) TMI 55
  Disallowance of salary to employees - assessee is a charitable trust - Held that:- Assessee did not make any effort to produce them before AO to show that they are working with the assessee and show the amounts paid to them duly confirmed. No doubt, the assessee can make payment in cash however it is for the assessee to show the authenticity and reliability of such payment. Whenever anybody questions the assessee about the genuineness of the payment, it is the duty of the assessee to discharge burden cast upon it by producing those employees or adequate details of those employees before the revenue authorities. It should not be forgotten that assessee is a charitable trust and is a property of public at large, therefore higher duties are cast on charitable trusts. AO and the Commissioner of income tax appeals with respect to this addition, we do not find any infirmity in their findings. In view of this the addition of Rs. 1569560 which is part of the salary paid by the assessee in cash to the teachers whose identity and genuineness of the payment could not be established by the assessee is confirmed. Withdrawal of exemption under section 11, 12 and 13 - surplus Land which is excess of income over expenses for the year - Held that:- Additional conditions for non-applicability of section 11 are provided under section 13 of the income tax act. The cash payment of the salary which has not been proved by the assessee is already held to be covered under section 13 (1) (a) and disallowed. One of the authorities on whom the powers of the verification of the genuineness of the activities are vested is Commissioner of income tax, who grants registration under section 12 A of the income tax act. In view of the continuation of the registration under section 12 A of the income tax act of the trust we do not find any reason to not to grant the benefit of section 11 and 12 of the income tax act to the appellant trust. Accordingly, we allow ground number 2 of the appeal and direct the learned assessing officer to grant exemption under section 11 and 12. Disallowance of depreciation on fixed assets - Held that:- Issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of Commissioner of income tax vs Rajasthan Gujarati charitable foundation [2017 (12) TMI 1067 - SUPREME COURT] there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. - Decided in partly in favour of assessee

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• 2018 (12) TMI 54
  Addition of the cash found at the time of search - complete justification & explanation. For the availability of cash was given - Held that:- In the present case, the amount was found in the bank locker of the assessee which was joint account along with her husband and no proper explanation or evidence was provided for the amount which was confirmed by the CIT(A). CIT(A) has given a proper partial relief after taking into account the amounts which were gifted to the child of the assessee on various occasions and also as shagun to her from certain occasions. There is nothing new material shown by the assessee as regards the cash found in the locker. Thus, the CIT(A) has correctly confirmed the partial addition - Decided against assessee.

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• 2018 (12) TMI 53
  Levying of penalty u/s 271(1)(c) - bogus transaction - Held that:- In the instant case, the assessee has furnished the details for purchase and sale of shares and furnished the names and addresses of the buyers and sellers of the shares. AO on the basis of the evidences placed before him held that the transaction was sham transaction. AO did not make any enquiry and disproved the claim of the assessee to hold that the transaction was bogus. Having furnished all the particulars by the assessee and the AO having failed to disprove evidences placed before him, we hold that there is no case for imposing penalty u/s 271(1)(c). Accordingly, we set aside the orders of the lower authorities and cancel the penalty imposed by the AO. The assessee’s appeal on this ground is allowed.

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• 2018 (12) TMI 52
  Reopening of assessment - whether mere disclosure in a re-assessment proceedings would permit the assessee to be absolved of the liability of re-assessment, after four years but within six years, if there was no full and true disclosure at the time of the original assessment, ie., under Section 143(1)(a)? - whether non-disclosure at the time of first re-assessment was the ground on which the First Appellate Authority or the Tribunal set aside the second re-assessment proceedings? - Held that:- We find that there can be no allegation raised of nondisclosure of full and true material facts, especially since it to be noticed that the estimation of profits on the contract bills were made by the A.O. himself for the previous assessment year. The expenses were also allowed on the estimation of profits. The assessee had claimed the benefit, since the receipt was accounted by the assessee in the previous year to the subject assessment year. What is pertinent is that the earlier years, assessment was completed making the estimation on certain contract receipts on 24.11.2000 under Section 143(3) read with Section 147. The return of income for 1998-99 was filed on 31.03.2000 prior to the completion of assessment of the previous assessment year. AO who carried out such assessment under Section 143(1) and 143(3) ought to have been more careful in having scrutinized the assessment order of the earlier year wherein the additions were made estimating a profit with respect to certain contract receipts. In any event, there could not have been any non-disclosure of full and true material facts alleged by the assessee since the return was filed long prior to the estimation made. In such circumstances, we are of the opinion that the proceedings itself was misconceived and the assessee had to file a first appeal in which the proceedings under Section 147 was set aside. - Decided in favour of assessee.

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• 2018 (12) TMI 51
  Addition on account of punitive charges paid to railway as over-loading charges - Held that:- Punitive charges by Railways cannot be considered to be penal in nature, and it is actually in nature of compensation paid by assessee for carrying out extra load, which may cause wear and tear to tracks of Railway Department. See CIT vs. Ahmedabad Cotton Manufacturing Co.Ltd [1993 (10) TMI 1 - SUPREME COURT]. Addition on account of water supply expenses - Held that:- CIT(A) restricted disallowance at Rs. 1,27,500/-, by considering the fact that supply of drinking water to employees/labourers at mining site with tanker is a must, to maintain workforce strong for extra loading and unloading of iron ore. Further, AO has not brought on record any contradictory facts which would lead to conclusion that expenditure has not been incurred for any other purposes. As there is no other contrary observations by Ld.AO which is based upon any material evidence, we do not find any reason to uphold addition. We therefore do not find any infirmity in the same and uphold view of CIT (A) in respect of this issue. Addition on account of hiring charges and rack loading charges paid to parties - violation of section 40A(2)(b) - Held that:- As observed from above reproductions that assessee deducted TDS. Merely because, according to Ld. A.O., payments were not reasonable, cannot be basis for disallowance. We are therefore inclined to uphold the view of Ld. CIT (A). - decided against revenue

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• 2018 (12) TMI 50
  Disallowance u/s 14A r.w.r 8D - Held that:- Decisions relied upon by Ld.Sr.DR has been passed prior to decision of Hon’ble Supreme Court in the case of Maxopp Investment vs CIT (2018 (3) TMI 805 - SUPREME COURT OF INDIA). Further Hon’ble Supreme Court in the case of Maxopp Investment vs CIT (supra), has rendered a clear finding in respect of banking institutions which is peculiar. Present assessee before us is also a Bank, where shares were held as stock-in-trade and therefore it becomes business activity of assessee. In our opinion specific observation Hon’ble Supreme Court in the case of Maxopp Investment vs CIT (supra), reproduced hereinabove are squarely applicable to facts of present case. We allow this ground raised by assessee and hold that these were not investments made by assessee in order to fall within the ambit of Rule 8D (iii) - Decided against revenue. Claim of leave encashment claimed - Held that:- Leave encashment is allowable on payment basis only. We therefore direct Ld.AO to allow claim of assessee in the year in which it has been paid and to disallow in the year of provision. We accordingly set aside Ground No. 3 back to Ld.AO with a direction to disallow the claim, in the year of provision and to allow claim in the year of payment. Ld. AO is directed not to levy any interest and penalty in the year of disallowance

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• 2018 (12) TMI 49
  Advance of amount in the normal course of the assessee s business - business of lottery agency - claim for deduction was under Section 28 - Held that:- In the instant case, we have seen that the assessee is not only in the business of lottery agency, but also in the business of financing as well. Records disclose that from the assessment year 1998-99, they have been advancing loans and receiving interest. Therefore, as a part of commercial expediency, the assessee, with a view to earn additional income, has advanced the surplus money available to their sister concern, which, on becoming irrecoverable, has been written off as a bad debt. For all the above reasons, we find that the Tribunal committed an error in reversing the order passed by the CIT (A) - decided in favour of assessee

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• 2018 (12) TMI 48
  Allowable business expenditure u/s 37 - expenditure incurred by the appellant for purchasing laboratory equipments as per Government Order - Held that:- In the instant case, the amounts incurred by the assessee was for installation of equipments in the Government Laboratory to facilitate examination of the samples received by the laboratory, which also includes samples of the assessee. The assessee's business is thus benefited; but, at the same time, the assessee has no ownership over the equipments purchased and hence it is not a capital investment. That apart, for getting the samples examined by the laboratory, the assessee would need to pay examination fees as is required by any other agency which sends samples for examination. The findings of the AO to disallow the claim of revenue expenditure, upheld by the Appellate Authority and the Tribunal on the premise that the expenditure incurred will not be a revenue expenditure entitled for deduction, cannot be upheld. When the assessee has been conferred with a monopoly of dealing in liquor and testing of the same and ensuring its quality is expedient to its business and the money expended for providing the facilities to an independent government agency, without any acquisition by itself is a revenue expenditure - assessee is entitled to treat the expenses, incurred by them for upgrading of infrastructure in the government laboratory, as per the directions of the Government, which owns the Corporation, as revenue expenditure. - Decided in favour of assessee.

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• 2018 (12) TMI 47
  Disallowance of investment write off claimed as a deduction in the computation of taxable total income - sustaining the loss incurred in the activity of promoting, establishing, running and supporting state owned electronic industries as a capital loss even though the said activity was the main business activity - whether the Tribunal was right in holding that the shares are stock-in-trade of the assessee company? - Held that:- The Division Bench took note of the Memorandum and Articles of Association which spelt out the main activities of the assessee (TIIC Limited) and held that the assessee was incorporated solely for the purpose of ensuring and facilitating growth and development of industries in the State of Tamilnadu and investments by way of subscription of shares is solely on account of the under writing operations. Further, it held that the investments are in the nature of stock-in-trade and cannot be held otherwise. In our considered opinion the decision in the case of TIIC Limited (2017 (7) TMI 1048 - MADRAS HIGH COURT) would squarely cover the case on hand and the question framed for consideration is required to be answered in favour of the assessee. As pointed out by us earlier, the objects for which the assessee company had been established by the Government of Tamil Nadu is no different from the purpose for which TIIC and TIDCO were established. Therefore, the CIT(A) was fully justified in relying upon the decision in the case of TIDCO. The Tribunal relied on a decision in the case of R.Chidambaranatha Mudaliar (1998 (4) TMI 77 - MADRAS HIGH COURT). We find that the reliance placed on the decision is thoroughly misconceived as in the said case, the loss was under different connotation namely with regard to Section 45 of the Act. Furthermore, in the said case, the head of income was never in dispute. Therefore, the Tribunal erred in relying upon the decision in the case of R.Chidambaranatha Mudaliar. Thus, for all the above reasons, the order passed by the Tribunal reversing the order passed by the CIT(A) is not sustainable. In the result, the appeal filed by the assessee is allowed.

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• 2018 (12) TMI 46
  Penalty u/s.271(1)(c) - Held that:- As far as the issue regarding depreciation on electric installation is concerned an addition of Rs. 8,502/- was made on account of difference in rate of depreciation. Thus, in our mind this doesn’t call for visiting the assessee with penalty. The assessee has disclosed basic facts fully and truly. It is a difference of opinion between AO and assessee about the admissibility depreciation at particular rate. As far as prior period income is concern the AO took the prior period income without giving set off prior period expenditure. ITAT in the quantum proceedings held that prior period income is to be set off against prior period expenditure. We have dealt with number of A.Ys and found that in certain A.Y the net balance was positive income whereas in other assessment year it was negative. Thus, on this issue it could be concluded that assessee has not concealed the particulars of income. It doesn’t call for visiting the assessee with penalty. As disallowance u/s. 14A is concern, during the quantum proceedings we have examined this issue and observe that assessee was having sufficient interest free fund for taking care of interest expenditure relatable to earning of tax free income on the estimate basis. Adhoc disallowance was confirmed in A.Y 2007-2008 and on same analogy adhoc additions stand confirmed for A.Y 2009-2010. Assessee has disclosed complete fact about the tax free income and how funds have been used. The Ld.CIT(A) has appreciated this aspect and thereafter deleted the penalty. Thus, we find that major additions which goad the AO to visit with penalty stands deleted in the quantum proceedings. The amount which have been added to income of the assessee on three issues were basically adhoc disallowances. The Ld.CIT(A) has appreciated this aspect and thereafter deleted penalty. We do not see any reason to interfere in the order of Ld.CIT(A) as far as Revenue’s appeal is concern. As far as assessee’s appeal is concern, we have already set aside the issue to the file of Ld.AO for re-adjudication in the quantum proceedings. There is no basis to visit the assessee with the penalty on this issue because the AO has yet to examine whether any disallowances/additions on account of Foreign exchange fluctuation loss claim is to be made in computation of total income of the assessee. After adjudicating this issue in quantum proceedings, it will be in the discretion of AO to initiate or not to initiate penalty on this issue. At this stage, there is no addition on whose basis it could be alleged that assessee has evaded tax. - Decided in favour of assessee.

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• 2018 (12) TMI 45
  Penalty u/s 271C - non-deduction of TDS u/s 194J - Held that:- Assessee has debited preoperative expenses of Rs. 2.25 lakhs on which tax was not deducted under section 194J of the income tax act. The assessee stated that it was covered by the exemption certificate under section 197 (1) of the income tax act dated 16th/1/2015. AO noted that the about tax deduction at source certificate has been given for the period from 10/12/2000 08/02/1931/3/2009 only. There was admittedly a failure on the part of the assessee to deduct tax at source on these above two expenses. However merely failure to deduct tax does not result into penalty under section 271C unless the adjudicating authority shows that there is a contumacious conduct of the assessee in failure to deduct tax at source. The issue is now squarely covered in favour of the assessee by the decision of the honourable Supreme Court of India [2016 (1) TMI 583 - SUPREME COURT] wherein it has been held that for levy of the penalty under section 271C of the income tax act the learned adjudicating authority has to show contumacious conduct on the part of the assessee. There is no such finding that assessee has deliberately avoided the tax deduction at source provisions by not deducting the tax at source and therefore has failed to prove the contumacious conduct on part of the assessee for failure to deduct tax at source. In view of this we reverse the finding of the lower authorities and direct the learned adjudicating officer to delete the penalty under section 271C - Decided in favour of assessee.

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• 2018 (12) TMI 44
  MAT - adding back the provision for bad debts in the computation 'book profits' in terms of Section 115JA for the purpose of taxation - Held that:- Identical question was answered by this Court in L.R.N.Finance Ltd. vs. Assistant Commissioner of Income-tax, Company Circle, Salem [2018 (4) TMI 1133 - MADRAS HIGH COURT] Hon'ble Supreme Court in the case of Apollo Tyres Ltd., vs. Commissioner of Income Tax [2002 (5) TMI 5 - SUPREME COURT] both Clause (c) and Clause (g) would be inapplicable to the assessee's case. However, we cannot make any observation in this regard, since the effect of the Clause (g) in Section 115JA(2) was never considered by the Tribunal, though on the date when the Tribunal took the decision, the said provision has already been inserted with retrospective effect. Therefore, to take a decision on the said fact, the matter has to be necessarily remanded to the assessing officer for fresh consideration. Further, the contention advanced by the learned counsel for the assessee is that even assuming that the proviso is applicable, then the proviso is not unconditional, as it lays down various parameters, which are required to be fulfilled. Decided in favour of the assessee and against the Revenue.

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• 2018 (12) TMI 43
  Reopening of assessment - admissibility of deduction u/s 80IB(10) in respect of Tans Residency Project - AO had rejected the claim inter alia on the ground that the development and construction of housing project had commenced prior to 01.10.1998 (which was the crucial date for claiming the benefits under Section 80IB(10)) - Held that:- All necessary facts were before the AO while deciding the original assessment. During such assessment, the assessee's claim of deduction was also minutely examined by the AO. Reopening of assessment beyond the period of four years was, therefore, correctly disallowed by the CIT(A) and the Tribunal. As noted, the only source available with the Assessing Officer to contend that relevant material was not brought on record by the assessee was assessment in case of M/s. Abode Builders. Here also, there is one vital defect in the logic adopted by the Assessing Officer. We do not find any where any material to suggest that the development and construction of the housing project commenced before 01.10.1998. Even in the reasons recorded, AO has not linked any material in order to make this observation. He has mainly relied on the findings of the AO of M/s. Abode Builders. This conclusion was reversed by the CIT(A) noting that in fact all along there was evidence suggesting that the commencement of construction of the housing project was some time in the year 2002. Assessee points out that the assessment order in case of M/s. Abode Builders was set aside by the CIT(A) and the same was confirmed by the Tribunal. No failure on the part of the assessee to disclose truly and fully all relevant facts as correctly held by the CIT(A) and the Tribunal - Decided in favour of assessee.

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• 2018 (12) TMI 42
  Penalty u/s 271(1)(c) - status of 'HUF' coupled with the provisions of Section 292BB - Held that:-The fact that the assessee himself had filed the return in the status of 'HUF' coupled with the provisions of Section 292BB the Tribunal was not right in declaring the assessment as invalid and annulling the same in view of judgment of this Court in CIT, Faridabad v. Shri Mangal Singh [2015 (11) TMI 646 - PUNJAB & HARYANA HIGH COURT]. The assessee did not dispute that the matter is required to be re-examined by the Tribunal. However, it was urged that the Tribunal while re-examining the issue be also directed to decide regarding assumption of jurisdiction under Section 148 of the Act by examining the records whether sufficient reasons and sanction of appropriate authority had been obtained before issuance of notice under Section 147/148 of the Act. The substantial questions of law are answered in favour of the revenue and against the assessee. Order regarding the penalty levied under Section 271(1)(c) of the Act challenged is also set aside. The matters are remanded to the Tribunal to adjudicate all the issues arising in the appeal after affording an opportunity of hearing to the parties in accordance with law.

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• 2018 (12) TMI 41
  Income from Sale of shares - business income or short term capital gain - Held that:- There were no instances of repetitive purchase and sale of shares. From the balance sheet, it could be gathered that the Assessee had used its own funds or interest free funds, borrowed from the Directors of the Company in order to purchase the shares. Assessee had taken physical delivery of the shares and in the books of account, treated the same as an investment. Inter alia, on said grounds, Tribunal had ruled in favour of the Assessee. Whether the purchase and sale of shares is in the nature of investment or business venture, would depend on facts and circumstances of each case. There are judicially laid down guidelines and parameters to judge whether in a case, the sale of shares would give rise to business income or capital gain. Nevertheless, essentially such question is a mixed question of law and facts. Tribunal has applied the correct parameters to the admitted the facts, emerging from the record. We do not find any error in such consideration. No question, therefore, arises for our consideration. Disallowance of Foreign Travel expenses - revenue expenditure OR capital expenditure - Held that:- Tribunal came to the conclusion that the Foreign Travel expenditure was incurred to increase the Assessee's customer base in different countries and also to open new avenues in the existing business of providing financial consultancy service. In nutshell, therefore, the Tribunal from the facts on record, held that the expenditure was for expansion of extending business and not for setting up a new business. No question of law arises

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• 2018 (12) TMI 40
  Disallowance of loss incurred on account of foreign exchange fluctuation - allowable business loss - whether loss claimed to have been sustained in earlier years has nothing to do with the current year’s transaction and hence, cannot be allowed for the year under consideration - Held that:- The assessee has also produced copy of the bank guarantee issued by the Central Bank of India, the applications and communication with the Reserve Bank of India for receipt and remittance of foreign exchange and also copies of communication assessee had with Ocean Diamond Inc. The additional evidences now filed goes to the root of the issue and for a proper adjudication of case, we admit the same on record. Since the additional evidences are taken on record, in the interest of justice and equity, the same need to be examined by the AO. Accordingly, we remit the issue to the Assessing Officer for de novo consideration. AO shall examine whether the amount of two Million USD was received by the assessee in the past years as trade advance in the course of its business of export of seafood and whether the foreign exchange fluctuation loss incurred by the assessee was on account of repaying the above trade advance. If the foreign exchange loss is on account of repayment of trade advance and is on revenue front, necessarily same is to be allowed as business loss. It is ordered accordingly. - Assessee's allowed for statistical purposes.

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• 2018 (12) TMI 39
  Depreciation of leased assets - admission of claim at the appellate stage - bonafide omission - whether a claim raised for the first time before the Appellate Authority, which claim was not available in the return filed before the AO, nor a revised return within the time stipulated; could be considered in appeal? - Held that:- It is to be noticed that the appellant was quite conscious of the fact that there could be no depreciation claimed on leased assets under the Act since no such claim was made in the returns filed. Hence, the claim not having been raised cannot be said to be a bonafide omission. The depreciation of leased assets having not been specifically claimed, the assessee was entitled to claim business expenditure, of the lease rent, which they had not claimed in the return. There was no such expenditure shown in the Profit Loss Account. The learned Counsel specifically refers to the balance sheet as produced by the assessee, along with the audit report to contend that the rent outflow is specifically indicated there. That would not facilitate a consideration of the issue as a bona fide omission; since the claim was not raised due to sheer negligence and it had not even figured in the profit and loss account. It was not the subject matter of assessment. This is not a case which comes under the cover of the facts being evident from the records, which would enable consideration of the claim at the appellate stage. - Decided in favour of the Revenue

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• 2018 (12) TMI 38
  Rejection of books of account - estimating the income at 3% - unexplained investment - Held that:- Income from the sale of liquor has been estimated at 3% of the cost of the goods put to sale and therefore, assessee has no grievance against the assessment order to this extent is confirmed For unexplained investment his is the first year of operation of the assessee and the assessee could start the business only after obtaining license from the Govt. and by making payment of the license fee. The assessee has made the payment of Rs. 18.00 lakhs towards the first instalment of the license fee and therefore, such an amount cannot be treated as unexplained income from the business of the assessee. This is the capital introduced by him and if at all, it can only be the income from the earlier years and not from the relevant previous year. Therefore, respectfully following the judgment of the Hon'ble Supreme Court in BHARAT ENGINEERING AND CONSTRUCTION CO. [1971 (9) TMI 14 - SUPREME COURT], we delete the addition of Rs. 18.00 lakhs. - Decided partly in favour of assessee.

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• 2018 (12) TMI 37
  Claim of deduction u/s. 37 in respect of amounts paid to GVF - whether these amounts were paid on account of commercial expediency and were revenue expenses wholly and exclusively for the purposes of business? - Held that:- As seen that two Revenue authorities and the Tribunal, concurrently came to the conclusion that, Assessee failed to establish the connection between the expenditure and its business activities. We further find that, there is nothing on record to suggest that trademark in question, had any marketable value and that the Assessee used said trademark for purpose of its products. We are informed that the Assessee is engaged in the business of manufacturing scientific instruments. The issue is purely factual. No question of law arises. Disallowance u/s. 14A r/w Rule 8D - absence of any recorded satisfaction of the assessing officer as to how, having regard to the accounts of the assessee, the assessee's calculation of disallowance was incorrect? - Held that:- Tribunal has also considered this issue in detail and noted that Assessee had made investments in shares which had also yielded considerable amount of tax free dividends. Allotment of small expenditure for earning tax free income, therefore, would not give rise to any question of law. Claim of expenditure in respect of traveling expenses of customers and consultants - expenditure incurred wholly and exclusively for the purposes of business - addition u/s 37 - Held that:- Assessee's claim of expenditure which was incurred for traveling of persons/ customers, who are not in the employment of the Assessee. The CIT(A) and the Tribunal examined the material on record and came to the conclusion that, same could not have been allowed as a business expenditure. No question of law arise.

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• 2018 (12) TMI 36
  Exemption u/s 11 - assessee did not have the required registration u/s 12AA - addition on account of corpus fund/donations, addition on account of creditors and addition on account of disallowance - Held that:- It is an admitted fact that the registration was granted vide order dated 8.6.2015 which was to have effect from 1st April, 2014. Although the assessment order was passed on 27.2.2014, the assessee was already registered u/s 12AA on 29.01.2016 when the assessee’s appeal was decided by the Ld. Commissioner of Income Tax (A). As the powers of the CIT(A) are coterminous with that of the Assessing Officer and further as the appellate proceedings are an extension of the assessment proceedings itself, we are of the considered opinion that the benefit of this proviso is to be extended to pending first appellate proceedings also. Accordingly, we hold that the assessee should be allowed the benefit of exemption u/s 11 - issue is restored to the file of the Assessing Officer to examine the assessee’s claim u/s 11 of the Act after affording proper opportunity to the assessee - Appeal of the assessee stands allowed for statistical purposes.

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• 2018 (12) TMI 35
  Deduction u/s 80HHC in respect of the DEPB and duty drawback and similar incentives disclaimed in its favour by the exporter - Held that:- As decided in assessee's own case [2013 (12) TMI 541 - MADRAS HIGH COURT] Receipts on Duty Entitlement Passbook Scheme (DEPB) would form part of the profits and gains of the business, it being the assistance given by the Government of India to an exporter to pay customs duty on its imports - The Explanation (baa) under Section 80HHC of the Act giving the formula for working out the deduction - "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by ninety per cent., of any sum referred to in clause (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 - 90% of the DEPB which is "cash assistance" against exports and is covered under clause (iiib) of Section 28 will get excluded from the "profits of the business" of the assessee, if such DEPB has accrued to the assessee during the previous year - Decided against Revenue.

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• Customs

• 2018 (12) TMI 34
  Entitlement/right to export - Crude Oil- Permissions/approvals/authorisations for direct export or permission/facilitation for canalised export through the third respondent - self-sufficiency - Held that:- It is apparent that the right to export crude oil, if it may be termed so, arises in two situations: one when self-sufficiency is declared and the deemed option conditions exist (clause 18.4) or when payment terms are infringed (Articles 18.5-18.6). No other situation of any contractor possessing a right to export can, in the opinion of the court, arise, on an overall consideration of the material terms of the contract. This is further reinforced by the fact that under Article 27 title to Petroleum underlying the Contract Area and shall remain the sole owner of Petroleum produced pursuant to the provisions of this Contract . Therefore, the right to export, contemplated under Article 18.7 is only where the UOI has elected not to purchase pursuant to this Article 18. It visualizes a situation where the consequence of declaration of sufficiency leads to the exercise of conscious option by the UOI (under Article 18.4) pursuant to its choice whether or not it intends to exercise its said option to purchase, in writing, not later than ninety days [90] prior to the commencement of the year in respect of which the sale is to be made. Thus, if the UOI, upon declaration of self-sufficiency of crude oil, elects not to purchase it, the contractor can be said to have an entitlement to export it. That eventuality did not arise in the facts of this case. On this count, the petitioner/appellants argument is insubstantial and has to fail. Whether under the FTP, the appellant could legitimately claim the entitlement they sought to enforce through writ proceedings? - Held that:- There is no right to export crude oil, per se. What the FTP enables is that if a case for export of crude oil is to be made, the canalizing agency, the IOL has to give the no objection certificate. The appellant s position therefore, that crude oil is mentioned as STE Export through IOL, supports that no entitlement for anyone else to export crude oil is created. The relevant chapter in FTP provides that if STE itself wants to export/import, it can do so and if any other person intends to import/export, it will have to apply to the STE, which can enable exports. The court is of opinion that the reasons given by the Central Government cannot be characterized as arbitrary or unreasonable. Since the appellant was permitted to sell quantities of crude oil to private refineries in India by the decision of the Empowered Committee of Secretaries, dated 17.08.2009, subject to certain conditions, it is evident that unutilised crude oil would be sold to domestic private refineries. No particular domestic refinery was named. A further condition that crude oil would be sold at international price, was also imposed. Appeal dismissed - decided against appellant.

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• 2018 (12) TMI 33
  Principles of natural justice - ex-parte order passed - appellant was asked to deposit entire duty and penalty confirmed by the adjudication order within 60 days of the receipt of the order - stay application also dismissed ex-parte - Held that:- The order passed by the Tribunal are without hearing the appellant, and therefore, dismissing the appeals without hearing the appellants and without discussing the merits of the case will not be in the interest of imparting justice - the appellants need to be heard before a decision on merits of the case is taken on the appeals. The appeals are to be restored to their original number in the interest of justice and recovery against impugned order-in-original may be stayed till final disposal of appeal - the Restoration of Appeal Application is allowed with stay of recovery of duty and penalties imposed in the impugned order in original.

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• 2018 (12) TMI 32
  Scope of the exemption - Interpretation of conditions imposed under N/N. 20/99-Cus and in particular Condition No. 75 - demand for customs duty has been raised in view of the fact that the goods were sent to Bangladesh before the completion of the five years period specified in condition no.75 of the Notification ibid - Held that:- This condition of the Notification binds the importer to use the imported goods exclusively for the construction of roads and further that such equipments should not be sold or otherwise disposed in any manner for a period of five years. It is not in dispute that the imported goods were not used for the construction of road in India. But the fact that the goods have been sent to Bangladesh, has been considered as disposal of the goods prior to completion of the mandatory period of five years. The goods were exported to Bangladesh after completion of the road construction project contract by the appellant with the Ministry of Surface Transport as well as Government of Tamilnadu. More importantly the goods were exported to Bangladesh not by way of sale or by way of transfer in any other manner. The goods title in the goods continued to remain vested with the appellant as is evident from the facts when the goods were reimported, the Bills of Entry were filed by the appellant. The appellant has not violated the conditions attached to the N/N. 20/99-Cus ibid. - there is no justification for demand of customs duty on such goods either in terms of N/N. 20/99-Cus or in terms of Notification No.94/96-Cus. - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 31
  Revocation of CHA License - forfeiture of security deposit - involvement of CHA in the offence - contravention of the Regulation 10 of the CBLR, 2013 - penalty - Held that:- The involvement of the appellant or its partner in the alleged customs offence detected and investigated by the DRI is not established. The bill of entry for the import was filed in the name of the appellant using his Customs Broker Licence number. In the statements recorded from Shri Arup Mukherjee, he has submitted that the import declaration form bears his signature, but he could not explain how the blank form signed by him found its way into the hands of Shri Barun Chanak. But what stands established is that the partner of the appellant has signed and handed over the import declaration form without filling up the details of any particular import. This has given room for misuse of such form subsequently. The contravention of the Regulation 10 of the CBLR, 2013 stands established against them - the ends of justice would be met by imposition of penalty of Rs. 25,000/- on the appellant - revocation of the Customs Broker Licence is not justified - appeal allowed in part.

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• 2018 (12) TMI 30
  Refund of SAD - N/N. 102/2007 Cus. - rejection on the ground that the refund claim filed by the appellant is time-barred as per Customs Notification 93/2008 dated 01.08.2008 amending Notification 102/2007 - Held that:- The decision of the Delhi High Court in the Sony India Pvt. Ltd. [2014 (4) TMI 870 - DELHI HIGH COURT] as well as the Gulati Sales Corporation [2017 (11) TMI 1300 - DELHI HIGH COURT] wherein it has been held that no time limit is prescribed for claiming the refund of SAD. The said decision of the Delhi High Court was followed by the Tribunal in the case of Purab Textile Pvt. Ltd. Vs. CC [2015 (6) TMI 998 - CESTAT MUMBAI] and has held that limitation as prescribed under Section 27 of the Customs Act is not applicable in the case of refund of SAD - refund allowed - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 29
  Quantum of penalty u/s 112 of FA - penalty was imposed in lieu of confiscation as the Impugned oil was leaked and could not be confiscated - presence of mens rea or not - Held that:- In the present case, the only contention of the importer, the appellant is that they had been carrying on the import earlier also under OGL. We notice that the Commissioner in Annexure G Order has specifically indicated that the concept of Hazardous Wastes was introduced for the first time on 01.04.1995 in the EXIN Policy 1992-97 through insertion of Sl.No.8 under Group H (Chemical and Allied Item) of Part II of the Negative List of imports, whereby Hazardous Wastes were placed in the Restricted List. The term Hazardous Wastes even then was not defined and the HSN aligned policy came into effect from 26.03.1996. In the HSN aligned policy which came into effect on 26.03.1996 there was an import licensing note in which it was inter alia stated that Hazardous Wastes will be permitted for import only against the licence for the purpose of processing and reuse. It was taking into account, these aspects that the import licence as well as authorization from the respective State Pollution Control Boards under Rule 11 of the Hazardous Wastes Rules was insisted upon. The import of the assessee was sought to be cleared by Bill of Entry dated 12.12.1986. Hence assessee cannot feign ignorance of requirement of an import licence as also authorization from the SPCB. The earlier imports under OGL has no relevance for reason of the change in Policy. There is absolutely no ambiguity insofar as the provision applicable under Section 112, which though not specifically mentioned is clear from the reference to Section 111(d). We also notice that the penalty imposed is in lieu of confiscation for reason of the goods not being available for confiscation. It is the admitted position that after the re-export was declined, the goods stored in containers in the premises of the appellant leaked out and the appellant s factory itself is closed down - The penalty imposed in lieu of confiscation is in fact a flea bite on the appellant, who was liable to confiscation of the goods imported. Appeal dismissed - decided against appellant.

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• 2018 (12) TMI 28
  Rectification of Mistake - Contention of appellant/ applicant is that though they had raised the ground that the computation of period of limitation by the learned Commissioner (Appeals) was erroneous, and their appeal was filed in time - Held that:- There is error committed in the final order of this Tribunal. Firstly, the ground taken by the appellant, as regards computation of the period of limitation, has not been decided. Secondly, there is no discussion on the ruling of Larger Bench, which had a binding effect on the Division Bench passing the final order - the final order dated 10.04.2018 is recalled in the interest of justice. Service of notice - relevant date of knowledge - Held that:- The date of receipt of the recovery notice is the date of knowledge i.e. 25 October, 2015, when the appellant received notice of recovery - from the date of knowledge, the appeal filed by the appellant before the commission appeals on 27 November 2015, was within time as the same is within 60 days from 25 October 2015 - Appeal remanded to the learned Commissioner (Appeals), to decide the appeal on merits. Application allowed.

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• 2018 (12) TMI 27
  Refund of amount paid in excess - appellant had not challenged the Order-in-Original - Held that:- Appeal of the appellant which is directed against the impugned order in this appeal, is infructuous to the extent of non refund of the amount in respect of declared items inasmuch as, appellant had not challenged the Order-in-Original dated 04.08.2009 to the first appellate authority and subsequent Order-in-Appeal dated 16.10.2009 wherein both the lower authorities have not reassessed the value of the declared items. In the absence of any such contest, the impugned order rejecting the refund claim as filed by the appellant is correct and does not require any interference - appeal dismissed.

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• Insolvency & Bankruptcy

• 2018 (12) TMI 70
  Corporate Insolvency Resolution Process - default in Payment - Held that:- Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. This Tribunal is satisfied that a default has occurred and the application under Section 7 is complete. The name of the IRP has been proposed and there are no disciplinary proceedings pending against the proposed Interim Resolution Professional. As a sequel to the above discussion, this petition is admitted and Mr. Tarun Jain with the address 805, Padma Tower-I Rajendra Place, New Delhi and email-id [email protected] and having registration number IBBI/IPA-002/IP-N00187/2017-18/10504 is appointed as the Interim Resolution Professional.

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• Service Tax

• 2018 (12) TMI 25
  Classification of services - certain jobs relating to their main contract of construction Tunnels, etc. to the appellant/assessee - Site formation and clearance, excavation and earth moving and demolition services or works contract service? - Held that:- Admittedly, the appellant/assessee has executed the work of site formation and clearances, excavation and earth moving and demolition services and other activity in respect of construction of tunnels, therefore, the appellant/assessee are not required to pay service tax in terms of Notification No. 17/2005-ST dated 07.06.2005 - there is no merit in the impugned order to demand service tax - appeal dismissed - decided against Revenue.

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• 2018 (12) TMI 24
  Validity of second ROM - Held that:- This RoM application seeks to raise another issue regarding paragraph 12 of the Final Order dated 31st October, 2017. In our opinion, this issue should have been raised by the Revenue during the course of hearing of the first rectification of mistake application - this RoM application is not entertained and is rejected.

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• 2018 (12) TMI 23
  Non-payment of Service tax - business auxiliary services - erection, commissioning & installation services - maintenance and repair services - Held that:- No doubt the Service Tax as demanded by the impugned show cause notice was to be deposited against the correct Service Tax Code of the appellant. There is admittedly no evidence for the deposit of impugned demand in the appellant’s Service Tax Code. But, the record bears the copy ot ST-3 Return as was filed by the appellant for the disputed period. Perusal thereof makes it abundantly clear that the said return is about the impugned amount only and that it was filed on 14.04.2011 itself. Accordingly, irrespective the amount was not actually deposited against the appellants ST Code, the fact remains is that the notice of impugned mistake was to the Department since April 2011 itself. In the given circumstances, the allegations of the Department about suppression of facts on part of the appellant with the mention that the mistake came to the notice only at the time of Audit is not sustainable specially in a case where the duty has been paid, however, to a wrong Excise Code. Extended period of limitation - Held that:- The period in dispute is of the year 2011. The show cause notice has been issued to the year 2014. The impugned mistake was in the notice of Deptt. since the year 2011 - SCN is barred by limitation. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 22
  CENVAT Credit - input services - marketing consultancy services - event management services - appellant providing management maintenance or repair services - Time limitation - penalty - Held that:- The findings of the adjudicating authority below for considering the title of the contract i.e. ‘Maintenance Contract’ while denying the relief are opined to be a rigid opinion. There is a catena of judgements holding that irrespective of the nomenclature of the contract the contract has to be read as a whole. Accordingly, all the services as required by the said agreement alongwith the maintenance and management etc. becomes the input services being very much included in the definition of input services as given in Rule 3 of Cenvat Credit Rules, 2004 - the appellants were entitled to avail the Cenvat Credit. Time limitation - penalty - Held that:- It was the onus of the Department to prove the alleged suppression or misrepresentation of the facts that too, with an intention of the appellant to evade the duty - There is no such evidence on record. Duty has regularly and duly been paid by the appellant. The Cenvat Credit as availed as being rightly availed - The show cause notice being beyond the period of one year is therefore held to be a time barred notice - penalty also not warranted. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 21
  Valuation - inclusion of reimbursement expenses in assessable value - Department was of view that the expenses which the appellant has got reimbursement from the service recipient were in the nature of freight, cartage, CFA, LOC, packing material, refreshment charges, drug licence charges, electric bills and telephone charges - suppression of taxable value - C&F agent service. Held that:- On perusal of the type of expenditures which have been reimbursed to the appellant in certain items like drug licence charges, telephone charges incurred on behalf of the service recipient it appears that the appellant have got reimbursement of actual expenditure incurred by him on behalf of his principle (consignor) and here he has only worked as a facilitator and a pure agent on behalf of his principle and therefore prima facie the appellant has a strong case to claim non-inclusion of such reimbursed amount from the taxable income. However, the other charges which he got reimbursed whether that is includable in his taxable value or not as per the provision of Section 67 of Finance Act, 1994 can only be decided by examining whether such expenditure that has been incurred on behalf of principle consignor are essential expenditures for providing the service of Consignment and Forwarding agents service and thus includable in the taxable value or not, is to be decided by getting necessary information with regard to individual expenditure reimbursed to the appellant. Matter remanded to the Original Adjudicating Authority with a direction that the necessity of each expenditure has to be examine to ascertain whether such expenditure was necessary on the part of the appellant in performing his work or same was incurred by the appellant only on behalf of the service recipient and he worked only as a pure agent with regard to these expenditures - appeal allowed by way of remand.

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• 2018 (12) TMI 20
  Rectification of Mistake - appellant have pleaded that this Tribunal has failed to take into account the work order dated October 13, 2008, wherein the Annexure I mentions the scope of the work - Held that:- On perusal of the work order, it appears that from electric point to electric point the scope of work also included material i.e. wiring and other material etc.; which were to be provided by the appellant - The scope of work order when considered in its letter and spirit would entitle the appellant for necessary abatement of 66% from the taxable value of service and hence may not be under the service tax net. An error apparent on the face of the record has crept in this case and, therefore, the earlier order No. 51681/2018 dated 03/05/2018 is recalled and the matter remanded for denovo adjudication to the original Adjudicating Authority which shall take into consideration the scope of work - appeal allowed by way of remand.

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• 2018 (12) TMI 19
  Online Information and Data Base Access and Retrieval Services - the activity of downloading the software through computer network - reverse charge mechanism - Held that:- Hon’ble Supreme Court has categorically held in the case of Indian National Shipowners Association vs. Union of India [2009 (12) TMI 850 - SUPREME COURT OF INDIA] that the liability for service tax from foreign service providers will arise only after Section 66A is incorporated into the statute w.e.f. 18.04.2006. This view also been admitted by the Revenue - the demand for service tax is to be set aside for the period upto 17.04.2006. Period from 18.04.2006 to January, 2007 - Held that:- It is not in dispute that the software has been downloaded from the internet from foreign based service providers. We are of the view that such activity will be covered within the definition of “Online Information and Data Base Access and Retrieval Services”. As such for the period from 18.04.2006 to January, 2007, i.e. for the period after the introduction of Section 66A, we are of the view that the liability for service tax arises on the assessees - if service tax is paid on reverse charge basis, the same will be available to the appellant who is a manufacture of the Public Address System as cenvat credit in the form of input services. Hence, we are of the view that this leads to a revenue neutral situation and even if liability of service tax arises, the same will not be payable. Even for the period from 18.04.2006, the liability for payment of service tax against the appellant does not arise - there is no scope for imposition of penalty also - Appeal disposed off.

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• 2018 (12) TMI 18
  Classification of services - certain works for Railways on works contract basis - Works contract service or not - Department seeks to demand service tax under management, maintenance and repair services on the services rendered by them - reverse charge mechanism - liability of service tax on GTA service - Held that:- It is not in dispute that the services rendered by the appellant during the relevant period involved both supply of materials and rendition of services and therefore are in the nature of works contract. The copies of the contracts provided by the learned counsel also clearly indicate that the nature of their contracts was works contracts. Further, show cause notice itself mentions that they had entered into contracts with Railways for works contract. The Railways had deducted VAT on composition basis from their bills towards payment of VAT component on the goods supplied by them - the works contract in respect of Railways was excluded from the definition. There is no hesitation in holding that appellant s services were not exigible and they were not required to pay any service tax both before 01.06.2007 and after this date - demand set aside. GTA Service - liability of service tax - Held that:- The appellant admitted that there is liability on some of the transaction of transportation of goods, where they engaged the goods transport agencies to the extent of Rs. 9,951/- on reverse charge mechanism - demand upheld alongwith Interest. Appeal allowed in part.

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• 2018 (12) TMI 17
  CENVAT Credit - capital goods - tippers - Held that:- The adjudicating authority in the impugned order has accepted the fact that appellant had discharged the service tax liability under both categories viz., site formation services and cargo handling services. It is also undisputed that cargo handling services are services which are classified under Section 65 (105) (zr) of the Finance Act, 1994 and these services are considered as eligible output services for availing Cenvat Credit on motor vehicles registered as capital goods - when it is undisputed that revenue is collecting service tax from the appellant under cargo handling services and having not re-classified the services, they cannot now turn around and say that the services rendered by the appellant could not fall under the category of cargo handling services for denying for availment of legitimate Cenvat Credit of Central Excise duty paid on tippers - credit allowed. Valuation - includibility - inclusion of value of free supplies of explosives and diesel in assessable value - period November, 2006 to September, 2008 - Held that:- The matter is settled by the Apex Court in the case of Union of India vs. Intercontinental Consultants & Technocrats Pvt Ltd [2018 (3) TMI 357 - SUPREME COURT OF INDIA] where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax - demand set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 16
  Transportation of the goods by road - Reverse Charge Mechanism - non-payment of service tax - eligibility for N/N. 34/2004-ST dated 03.12.2004 - Held that:- The appellant is claiming the benefit of exemption Notification; it is for them to prove that the benefit of this notification is available to them. In case of any doubt, the benefit of doubt will go to the Revenue. In this case the appellant has produced no proof to substantiate their claim that they are eligible for the exemption notification either before the Original Authority or before the First Appellate Authority or even in this appeal - appellant is not eligible for exemption notification - demand upheld - appeal dismissed - decided against appellant.

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• 2018 (12) TMI 15
  Works contract service or not - contracts were for supply of goods and services and the execution of the said contracts were prior to 01.06.2007 - Held that:- The ratio of the Apex Court judgment in the case of CCE vs. L&T Limited [2015 (8) TMI 749 - SUPREME COURT] would directly apply as there is no dispute that the contracts which were entered into by the appellant were for supply of goods and services in execution of the contracts, where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - demand set aside. Valuation - includibility - inclusion of cost of free supplies in assessable value - period involved in this case is prior to 01.06.2007 - Held that:- The issue now settled in the case of CST vs. Bhayana Builders (P) Ltd. [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], where it was held that The value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005 - demand set aside. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (12) TMI 14
  Valuation - Deduction of the sale tax - related party transaction or not - appellant/assessee were removing the aerated waters exclusively to their marketing company i.e. M/s Dhillon Kool Drinks, Babarpur/Delhi for further distribution and sale to various sub distributors - applicability of Section 4 of the Central Excise Act - Held that:- The adjudicating authority has allowed deduction on account of sales tax on aerated water sold in bottles but failed to give the deduction on account of sales tax on bag-in-box. In fact, the same treatment is required to be given for the sale of bag-in-box, therefore, on account of sales tax which is of inclusive of the price, the appellant/assessee is entitled for deduction from the selling price of aerated water in bottles as well as bag-in-box. On account of sales tax, the deduction from the assessable value is allowed in terms of Section 4 of the Central Excise Act, 1944 - demand to that extent is set aside. The demand for the extended period is also set aside - it is the issue of valuation of goods and no penalty is imposable on the appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 13
  Rectification of mistake - typographical error - error apparent in the face of record - Held that:- In place of the OIA No. the appropriate OIA No. should have been as “OIA No. BHO-EXCUS-001-APP-325-17-18” and in place of name of DR the appropriate name should have been as “Shri M.R. Sharma.” - The same are corrected in page No. 1 Final Order dated 03.07.2018. - ROM application allowed.

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• 2018 (12) TMI 12
  100% EOU - penalty u/r 26 of CER - Clandestine removal - duty free yarn procured domestically as well as imported - Held that:- It is an admitted fact that the premises of job workers were used to show supply of duty free yarn and manufacture there from in that job worker’s premises but in the investigation, it is established that the job workers had no manufacturing facility. Therefore, the job work premises were used only to mislead the department by showing fake job work and consequently cleared the duty free yarn in the open market. In the process of duty evasion, the job workers have actively contributed in duty evasion inasmuch as the premises of job worker were shown to have rented out to M/s. PPL. Moreover, the job work challans were also signed by those job workers. Despite the fact known to them that there is only paper transaction is being done, the job workers have signed the blank challans which were used by M/s. PPL for showing the job work. Therefore, the appellants (job workers) mentioned at serial No. 1 to 7 were actively involved in facilitating M/s. PPL for clandestine removal of duty free yarn - they are rightly liable for penalties under Rule 26 / 209A. Penalty on other appellants, M/s. Regent Overseas Pvt. Limited and M/s. Pooja Tex Prints Pvt. Limited to whom M/s. PPL had shown clearance, - Held that:- It is seen that they had also actively and knowingly connived with M/s. PPL in diversion of duty free raw materials inasmuch as manipulating the documents to show the receipt of grey fabrics of heavier GSM whereas in fact they had received the grey fabrics of lighter GSM. Thus, they have facilitated M/s. PPL by showing receipt of goods from M/s. PPL and are correctly liable for penalty under Rule 209A of erstwhile Central Excise Rules, 1944 / Rule 26 of Central Excise Rules, 2001/2002. Penalties upheld - appeal dismissed - decided against appellant.

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• 2018 (12) TMI 11
  Time limitation - no malafide intent - Classification of goods - carved articles of Marbles - whether classified under CETH 2504.90 or under CETH 6802 2190? - Held that:- It is clear that the issue was highly debatable as the adjudicating authority by analyzing the tariff entries given a detail finding and dropped the classification claim by the appellant. Subsequently, the Commissioner (Appeals) on the basis of the tribunal decision in the case of Nitco Tiles Ltd. [2003 (10) TMI 467 - CESTAT, MUMBAI] reversed the order. These proceedings itself shows that the issue involved was not free from doubt, therefore, malafide intention cannot be alleged against the appellant. Also, the department itself accepted in the year 1997 that product ‘Carved Marble Product’ is classifiable under Chapter heading 2504.90. The facts regarding the claim of classification under 2504.90 and exemption there on was well within the knowledge of the department, therefore, nothing prevented the department from issuing the SCN within the normal period which department failed to do so - the appellant had neither any malafide intention nor they have suppressed any fact from the department. Accordingly, the SCN issued after almost six years of the period for which demand pertains is clearly time barred. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 10
  Benefit of concessional rate of duty of 6% on the paper board manufactured - It appeared to Revenue that unless waste paper is more than 75% by weight, the appellants were not eligible for benefit of concessional rate of duty - N/N. 12/2012 dated 17.03.2012 - Extended period of limitation. Held that:- Revenue had an impression that unless waste paper is used for making pulp, the appellant is not eligible for concessional rate of duty provided under N/N. 12/2012 - the definition of rags as submitted by the learned counsel for the appellant and as contained in Textile (Consumer Protection) Regulation 1988, that rag emerge out of fabric and they do not emerge out of old cotton clothes. It is admitted in the show cause notice that appellant was using old clothes for making pulp. Revenue could not make out a case that appellant was not eligible for the said benefit - appeal allowed - decided in favor of appellant-assessee.

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• 2018 (12) TMI 9
  Concessional rate of duty on wagons of pay-load not exceeding 60 MT - Benefit of N/N. 452/86-CE dated 20.11.1986 - Since the pay-load exceeded 60 MT, the department was of the view that the benefit of N/N. 452/86-CE dated 20.11.1986 will not be available to the respondent - Held that:- The declared pay-load capacity is 60 MT, in terms of the drawing and design submitted by Railways to the Respondent. The investigation carried out by the department has raised doubts that the pay-load capacity is in excess of 60 MT but only to the extend of 00.008 MT - the adjudicating authority has accepted the declaration of the pay-load capacity by Railway, there is no reason to interfere with the impugned order and the same is sustained - appeal dismissed - decided against Revenue.

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• 2018 (12) TMI 8
  Carry forward of accumulated credit on Debonding of units - Transition of CENVAT Credit - transfer of accumulated credit - applicability of rule 10 of CENVAT Credit Rules, 2004/rule 11 of CENVAT Credit Rules, 2004 - Held that:- The scheme of indirect taxation requires that the tax burden is borne by the ultimate consumer, i.e. non-assessee, and all assessees in the production chain merely collect the duty for remitting to the government. At the same time, excise duties are limited to the contribution made to the manufacture of any goods; this requires that, for the proper administration thereof, each stage in the manufacturing process should be entitled to disassociate itself from the duties discharged upto the immediately preceding for computation of excise liability. Thus the full burden of duty should, without the privilege of passing on, be borne by the first non-assessee in the chain of transactions. The input credit scheme is devised towards that end and embodied as the CENVAT Credit Rules, 2004. Denial of CENVAT credit accumulated from duties discharged on procurements employed in exported goods would, therefore, load the burden on the exporter which defeats the very premise that is contained in the CENVAT Credit Rules, 2004. The provisions of rule 10 or rule 11 will not apply to debonding units. It is also patently clear that a similar provision has not been explicitly incorporated in the CENVAT Credit Rules, 2004 for such debonding units - Denial of such utilization would have the impact of taxing the exporter as ultimate consumer and burdening the appellant with an implied duty on exports that is not authorized by law. To do so is to act illegally. Denial of carry forward of accumulated CENVAT credit to assessees debonding from the 100% Exported Oriented Unit scheme to continue operations without the privileges is not correct in law - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 7
  Valuation - P or P medicaments - period 21.05.2004 to 08.01.2005 - Held that:- The valuation of P or P medicaments manufactured by loan licensee/ job worker is now settled by the Apex Court in the case of Cosme Farma Laboratories Ltd [2015 (4) TMI 355 - SUPREME COURT], where it was held that Once it has been determined that the job workers are the manufacturers, the assessable value of the goods would be a sum total of cost of raw material, labour charges and profit of the job workers, as per circular No.619/10/2002-CX dated 19th February, 2002. The matter remanded back to the adjudicating authority to reconsider the issue afresh after following principles of natural justice.

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• 2018 (12) TMI 6
  Interpretation of statute - N/N. 49/2008- CE (NT) dated 24.12.2008 amended by Notification No. 9/2010- CE (NT) dated 27.02.2010 - vulcanised rubber tubes - whether the description of the goods, ‘parts, components and assemblies of automobiles’ in Notification No. 2/2006- CE (NT) read with Notification No. 11/2006- CE (NT) includes tubes or not? - Held that:- Firstly, it is evident that as far as this notification is concerned, for parts of automobiles to be covered, they need not fall under chapter 87 and they can fall under any heading of the Tariff. In the case of J.K Tyre & Industries Ltd [2018 (2) TMI 611 - CESTAT NEW DELHI], it has been held that tubes and tyres cannot be considered as parts of automobiles because they are also used for animal drawn vehicles, aircrafts etc. The tubes manufactured by the appellant cannot be called as parts of automobiles and therefore the Notification No. 2/2006- CE (NT) read with Notification No. 11/2006- CE (NT) prescribing Central Excise duty under Sec.4A based on RSP does not apply - also the retrospective applicability of the Circular or otherwise becomes irrelevant. Appeal dismissed - decided against appellant-Revenue.

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• 2018 (12) TMI 5
  Valuation - inclusion of cost of transportation and insurance charges for the purpose of valuation in assessable value - Section 4 of the Act read with Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - place of removal - appellant was not heard in support of his claim - principles of natural justice. Held that:- The place of removal of goods depends upon the facts of each case and conditions of sale. Once it is contended by the appellant that sale was subject to inspection to be done by the customers at their end and payment was to be made by the customers after receipt of material(s) and testing/final approval with a condition that if the materials were not found as per the ordered specification, same will be rejected and lifted back by the appellant at his own cost. Therefore, in such a situation, place of removal is at the place of buyer on the delivery of goods subject to the satisfaction of specification and testing. Keeping in view the reasons for non-appearance before the CESTAT on 12.03.2018 coupled with the stand of the appellant that the Commissioner (Appeals) which was the last court of appeal for reappreciating the factual aspect has not appreciated the factual aspect in its right perspective same was pertinently to be looked into by the CESTAT. In case the appellant would have been heard by the CESTAT, the factual position to determine the place of removal within the meaning of Section 4 of the Act would have been decided properly. The appellant has not been heard in support of his appeal by CESTAT and in the process, vital issue regarding appreciation of factual position as was projected by the appellant before the Commissioner (Appeals), has effectively remained to be looked into by the learned Tribunal (CESTAT). The matter is remitted back to the learned Tribunal (CESTAT) for deciding the appeal a fresh - appeal allowed by way of remand.

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• 2018 (12) TMI 4
  Recovery of wrongly availed CENVAT Credit - demand on the ground that the Captive Power Plant being a turn-key project was not excisable goods as per Board’s Circular No. 58/1/2002-CX dated 15.01.2002 and that the components, equipment, accessories and spares used for installing the Power Plant were not covered under Rule 2b(iii) of the CCR, 2002 - Held that:- Reliance placed on the judgement in the case of M/s. Thiru Arooran Sugars Ltd. Vs. CESTAT, Chennai & anor. [2017 (7) TMI 524 - MADRAS HIGH COURT], wherein the Hon’ble Madras High Court has held that MS Angles, Channels, etc. being an integral part of the Power Plant and Machinery, were eligible for credit - credit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 3
  100% EOU - imposition of penalty - whether penalty can be imposed on M/s. Monalisha garments whose EOUs is situated within the jurisdiction of the Haldia Commissionerate? - Held that:- M/s. Monalisha Garments has claimed receipt of duty free material from M/s. Spectrum Silk Mills as well as M/s. Marvel Fashion (both EOUs). However, it stands established that only invoices were received from M/s. Spectrum Silk Mills as well as M/s. Marvel Fashion, but no goods were received - From the facts of the case, it stands established that both the above persons have facilitated M/s. Monalisha Garments in misusing the EOU Scheme, resulting in huge evasion of duty to the Government. For the role played by M/s. Spectrum Silk Mills and M/s. Marvel Fashion, penalties imposed on them also. Appeal allowed - decided in favor of Revenue.

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• 2018 (12) TMI 2
  Refund claim of duty paid - duty were paid on the products which were exempted under N/N. 6/2002 dated 01.03.2002 - rejection of refund on the ground that exemption is not available to the respondent because they had not claimed it before clearing the goods from the factory gate - denial of refund also on the ground of unjust enrichment - Held that:- There is nothing in the notification which requires assessee to claim the benefit of this notification prior to the removal of goods from the factory and therefore, first appellate authority correctly sanctioned refund on merits. Unjust enrichment - Held that:- The established legal principle is that the burden of proof that the duty incidence has not been passed on to the customer rests upon the claimant. The respondent herein has adequately discharged this duty and the documents submitted by them have been examined in detail by the first appellate authority while allowing their appeal - What is being claimed is just the duty paid by them on their final product which has not been passed on to their customers. Therefore, the question of indirectly passing on the incidence of duty to the customers does not arise. Refund is to be allowed - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (12) TMI 1
  Exemption from payment of tax - Cotton Fabrics - stock transfer - Section 9(2) read with Section 30 of the Central Sales tax Act - Held that:- The finding recorded by the assessing authority confined by the first appellate authority as well as Tribunal are finding of facts, need no interference by this Court. No question of law is involved and therefore the questions of law referred by the assessee and decided against the assessee - The autorities below including the Tribunal have arrived at the conclusion that it is not the stock transfer but is a sale against the orders which are received by the revisionist from the buyers in advance. No question of law arises in all the four revision petitions related to Central Sales Tax Act, accordingly the same are dismissed - petition dismissed.

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• Indian Laws

• 2018 (12) TMI 26
  Maintainability of petition - alternative remedy of appeal under Section 18 of the SARFAESI Act - respondent had directed the petitioner to hand over the possession of the secured assets on account of failure to discharge full amount of loan - Held that:- Admittedly, the petitioner has not challenged the order dated 20.9.2018 (Annexure P-8) passed by the Tribunal. The petitioner cannot challenge the impugned notice dated 15.10.2018 (Annexure P-10) without challenging the order, Annexure P-8. It was under such circumstances that no order favourable to the petitioner can be passed. Further, against the order of the Tribunal there is a remedy of appeal under Section 18 of the SARFAESI Act. The Apex Court in Commissioner of Income Tax and others vs. Chhabil Dass Agarwal, [2013 (8) TMI 458 - SUPREME COURT], considered the question of entertaining writ petition where alternative statutory remedy was available, where it was held that Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon. The writ petition is dismissed being not maintainable.

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