Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 4, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of services - Supply of Services or not - Services to NMC by providing the Busses along with Driver, Fuel & Maintenance for use of General Public at Large - The activity is liable to GST.
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Levy of GST - The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.
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Classification of goods - various poultry feed products - whether covered under the HSN CODES 2301, 2302, 2308, 2309 and effectively exempted or not - As such applicant product Mono calcium phosphate is not covered by the scope of exemption notification
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Detention of goods with vehicle - goods detained on the ground Part B of the accompanied e-way bill has not completed - if the petitioner desires to have the interim release of the goods, there is no escape from Section 129.
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Profiteering - Respondent did not pass on the benefit arising out of the increased ITC in the case of the subject transaction - the possibility of the Respondent having profiteered and thus unfairly benefited in the similar manner, in case of the other supplies affected by him to other customers, cannot be ruled out.
Income Tax
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Reopening of assessment - assessment in the name of Legal representatives - validation of proceedings u/s 292B r.w.s. 292BB - The legal heirs participated in the assessment proceedings but never filed any reply on the merits of the issue - ITAT has wrongly set aside the assessment order.
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TDS u/s. 194H / 192 - incentives paid to the employees - TDS liability - The total payment including salaries are below the threshold limits - Observation of the AO that assessee has changed the nomenclature of the expenses to incentives is not correct.
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Receipts on account of “Sale of Software” - chargeability to tax as income from Royalty u/s 9(1)(vi) and Article 12 of the DTAA - India-Ireland DTAA - Since treaty provisions are more beneficial, an adjudication on nature of receipts vis a vis provisions of Section 9(1)(vi) is not required.
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TDS u/s 194C or 194J - outsourcing fee operation and record storage expenses as data sorting, scanning, retrieving of records - annual maintenance charges paid was liable for deduction of tax at source u/s 194C and not u/s 194J
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Disallowance of payment made to relatives of the Directors u/s 40A(2)(b) - AO should have considered experience, qualification and technical competency, which has not been done in the instant case - Director is taxable at maximum marginal rate - Additions deleted.
Customs
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Procedure for disposal of un-claimed/un-cleared cargo under section 48 of the Customs Act, 1962, lying with the custodians –reg.
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Advance licenses - who is liable to fulfill the condition of notification, the original licensee or the “transferee” of the licensee? - Any way onus to prove that input stage credit was not availed in respect of the goods exported is not certainly on the “transferee” the licence i.e. appellants.
DGFT
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Availability of Speed Post dispatch particulars in MEIS module
Service Tax
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Business Support Services - The group entity has merely arranged certain services for Colt group as a whole, the cost of which is being shared between the group companies - The activity is not taxable as BSS
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Demand of Interest - CENVAT Credit availed but not utilized - since the assessee has not taken the benefit of the cenvat credit taken except entry in their account books, there was no liability to pay the interest.
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CENVAT Credit - relationship between input and output service - a scrutiny by the adjudicating authority was made in the absence of the appellant who, given an opportunity, would have been in a position to justify the same, subject to satisfaction of the adjudicating authority.
Central Excise
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CENVAT Credit - input - lubricants /greases used in the dumpers - the dumpers in question are being used for transporting the extracted ore in the Mines of the appellant. Ore is an input of the appellant herein and the entire Mines is the place of manufacture - Credit allowed.
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Classification of goods - Micro Cellular Rubber Blocks - actual user based exemption - even if the buyers used the goods for repair of footwear, the violation of condition of Notification cannot be presumed.
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Extended period of limitation - Merely that assessee is PSU is not sufficient to set aside the SCN as being barred by time - SCN not barred by time.
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Misdeclaration of goods - declaring one of the products that is Natural Gasoline Liquid (NGL) as “Naphtha” - Commissioner rather has proceeded with the pre-supposed mind of holding the product of respondent being Naphtha. The findings accordingly are held as apparently wrong hence are hereby set aside
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Clandestine removal - surplus stock of angles, channel and joist - non-acceptance of appellant's explanation does not raise any substantial question of law
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Interest on delayed refund - Section 11BB of the Central Excise Act - the definition of 'debt' under the Interest Act, covered the present event also - appellant is entitled to interest @ 6% per annum
Case Laws:
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GST
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2018 (12) TMI 145
Classification of services - Supply of Services or not - Services to NMC by providing the Busses along with Driver, Fuel & Maintenance for use of General Public at Large - under which Chapter Heading / Service Code the activity is required to be classified? - Held that:- The applicant has entered into an agreement with NMC and as per the agreement, they are providing the Services of Running AC Green City Buses for Transport of General Public, for which NMC is paying them Service Charges calculated on the Total Run effective kilometers and the fare from the passengers is collected by NMC - NMC is providing transportation services to the passengers and the applicant, for such transportation, is supplying to NMC Buses along with drivers, fuels, maintenance, etc. In effect, it is found that there is no connection between the applicant and the passengers. The applicant is just hiring out these AC Buses to NMC and it is also found that the effective control is with the applicant so far as the Buses are concerned which are provided to NMC. Also the Bus Routes are decided by NMC as also the Bus Fares, which are collected from the passengers. Hence it is crystal clear that in the subject case the transaction would be of the nature of transfer of right to use any goods and the amounts received by them on kilometer basis would be considered as hiring charges. As per sub-clause (0 of clause 5 of Schedule II appended to both, the CGST Act, 2017 and the MGST Act, 2017 “transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration: would be considered as Supply of Services - In the subject case the applicant vide Service Provider Agreement entered into by them with NMC have transferred of right to use the goods i.e. AC Buses belonging to them. The said rights as per the agreement have been transferred to NMC for a period of 15 years from the commercial operations date (COD). COD in the agreement has been defined as the date on which period of 6 months are completed from the date of execution of the agreement. In the subject case there is transfer of the right to use any goods (Buses) for any purpose i.e for transportation purpose and for a specified period of 15 years for cash. Thus as per sub-clause (f) of clause 5 of Schedule II appended to both, the CGST Act, 2017 and the MGST Act, 2017 the subject activity of the applicant would be considered as Supply of Services. The applicant is rendering services to NMC by way of giving out on rent/hire, Buses which are further used by NMC for transportation of passengers. Such renting of Buses by the applicant squarely falls under Sr. No. 10, Heading No. 9966 sub- clause (ii) as rental Service of transport vehicles, in this case with operators and therefore attracts CGST and SGST @ 9% each on remuneration received for such services rendered by the applicant. Ruling:- The activity undertaken by the applicant in the subject case is supply of services and will be classified under Sl. No 10(ii), Heading 9966 of the Notification No 11/2017-Central Tax (Rate) dated 28th June 2017.
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2018 (12) TMI 144
Levy of GST - supply of goods located outside India to customers within India without physically bringing the goods to India - out & out supplies, export supplies or exempted supplies? - High seas sales. Held that:- The applicant would be purchasing goods from M/s. Innospec on the basis of purchase orders received from their customer in India and the said goods would be delivered by M/s. Innospec from outside India to the ship/ vessel of the customer which is also outside India (non-taxable territory) i.e. Singapore. The order received by the applicant from their customers in India and order placed by them on M/s. Innospec are back to back orders. Thus it is very clear that the goods are delivered by M/s. Innospec from a place situated outside the taxable territory of India to their customer's vessel which is also located outside the taxable territory of India - the transaction is similar to the selling of goods on High Seas Sale basis 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 - From the transactions placed, 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 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 - as per Section 7(2) of the IGST Act and proviso to Section 5(1) of the IGST Act it is very clear that in respect of import goods there is no levy and collection except in accordance with the provisions of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff Act, 1975. Thus 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. 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 - the position is further reiterated and confirmed by Circular No. 3/1/2018 - IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing. Ruling:- The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India. The supplies in the present case would be “non-taxable supply” as per Section 2(78) of the CGST Act, 2017 which means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services tax Act.
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2018 (12) TMI 143
Classification of goods - Fan Coil unit - Whether the Fan Coil unit is covered under HSN Code 8418 under Goods and Service Tax Act, 2017? Held that:- Fan Coil Unit (FCU) is a simple device consisting of a heating and or cooling heat exchanger or ‘Coil’ and fan. It is a part of HVAC system found in residential, commercial and industrial buildings. A FCU is a diverse device sometimes using ductwork and is used to control the temperature in space where it is installed or serve multiple spaces. It is controlled either by a manual on/off switch or by a thermostat which controls the throughput of water to the heat exchanger using a control valve and/or the fan speed - FCUs circulate hot or cold water through a coil in order to condition a space. The unit gets its hot or cold water from a central plant or mechanical room containing equipment for removing heat from the central building’s closed loop. The equipment used can consist of machines used to remove heat such as chiller or a cooling tower and equipment for adding heat to the building’s water such as boiler of a commercial water heater. It is very apparent that FCUs are not Refrigerators, Freezers and other refrigerating or freezing equipment and neither are heat pumps and therefore in no way they would fall under GST Tariff Heading 8418 - FCUs would clearly be covered under GST Tariff Heading 85159000 as parts of Air Conditioning machines of Heading 8515. The plea of the applicant contending that their goods would be covered under 8418 on the basis of the Hon’ble Supreme Court’s decision in the case of CCE Delhi versus Carrier Aircon Ltd. [2006 (7) TMI 8 - SUPREME COURT OF INDIA] is not sustainable in view of the facts that the goods ‘chillers’ as discussed in this judgement had the basic function of chilling the water and were thus held by the Hon’ble Supreme Court to fall in Heading 8418 for Refrigerators and Freezers, whereas the basic function of a FCU is conditioning the temperature of a place or space and not freezing or refrigerating and therefore FCU would appropriately be covered under CTH 8415. Ruling:- The Fan Coil Unit is not covered under HSN Code 8418 but under HSN Code 8415 under Goods and Service Tax Act, 2017
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2018 (12) TMI 142
Classification of goods - rate of GST - Neem Seed - neem seeds in frozen or dried form - neem seed powder - classification under HSN Code 1211 - whether classified under 0% GST Rate or 5% CST Rate - Held that:- From the entries under HSN code 1211 there is no ambiguity that Plants and parts of plants (including seed and fruits) used as "fresh or chilled" would be tax free, whereas plants and parts of plants (including seed and fruits) used as "frozen or dried, whether or not cut, crushed or powdered" would be taxable @ 5% GST - It is also observed that under HSN code - 1209, the Seed useful for sowing i.e. 'Seeds, fruit and spores of a kind used for sowing' is tax free. The crucial determination point here in this entry is the word 'sowing'. Thus in case the quality of seed is not suitable for sowing, it cannot be treated as of seed quality, thereby making it exigible to GST @ 5%. Currently in commercial sector 'dry neem fruit' is not identifiable with 'seed for sowing'. The Neem fruit is known as 'Nimouli' in Chhattisgarh and is collected in both fresh and dry forms and is used for making neem oil only, after drying the neem seed. Dry neem fruit is not generally used for trading for horticulture or agro-based commercial purpose i.e. dry neem fruit is not identifiable with seed commercially. Thus on the basis of 'common parlance' or 'trade parlance' theory too propagated by the applicant, the goods intended to be supplied by the applicant can by no stretch of imagination be categorized as those attracting tax @ 0%. The said goods to be supplied by the applicant does not fulfill the conditions mentioned under HSN code 1209 and 1211 neither in the 'specific form' nor 'specific use', as stipulated under GST Act to be categorized as attracting tax @ 0%. Ruling:- Supply of neem seeds in frozen or dried form for the purpose as specified by the applicant and the said seeds being not of seed quality, supplied by the agro-division business of the applicant would merit being taxable at 2.5% SGST and 2.5% CGST. Supply of neem seed powder for the intended purpose as specified by the applicant, supplied by the agro-division business of the applicant would be taxable at 2.5% SGST and 2.5% CGST.
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2018 (12) TMI 141
Classification of goods - various poultry feed products - whether covered under the HSN CODES 2301, 2302, 2308, 2309 and effectively exempted or not - Held that:- A feed additive is a food supplement for farm animals that cannot get enough nutrients from regular meals. Such additives include vitamins, amino acids, fatty acids, and minerals. Animal feed is food given to animal which is essential to the development, sustenance, maintenance etc. On the contrary supplement is added to animal feed in order to improve it or make it complete feed. Similarly additive is a food supplement for farm animal that cannot get enough nutrients from regular meals. Therefore there are large number of products that are added to feed and which are capable of providing nutrient required for animal based upon the nature of husbandry such as meat, milk, egg etc. - the entry 102 of the exemption notification is not open ended. It cover those goods that are falling under chapter Heading 2301, 2302,2304,2305,2306,2308 and 2309 and which satisfy the description of goods as animal feed, supplement, concentrate and additives. These imported goods alone are eligible to avail the benefit of tax exemption under the GST ACT. The description of goods against chapter Heading 2835 as mentioned at Sr. No. 105 of exemption notification 2/2017 Integrated Tax (Rate) dated 28/6/2017 covers only Di calcium Phosphate (DCP) of animal feed grade confirming to IS specification No. 5470:2002 - As such applicant product Mono calcium phosphate is not covered by the scope of exemption notification No. 2/2017-Integrated Tax (Rate). The products referred by the applicant in the application will not be covered under Entry- 102 but would be covered under chapters like 28 and 29. Those chapters are related to Organic and inorganic chemicals. Chapter 28 and 29 are not covered under exemption notification no 2/2017 date .28.6.2017 except the HSN Code of 2835. Ruling:- The products referred under application are not covered under entry 102 of the notification 2/2017-lntegrated Tax (Rate) dated 28th June, 2017, except Di Calcium phosphate(28352610) of animal feed grade, which is covered under Entry No. 105 of Notification No. 02/2017-(lntegrated Tax) (Rate) The rest of products would fall under Schedule III and would be liable to tax @ 18 % IGST.
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2018 (12) TMI 140
Detention of goods with vehicle - detention on the ground that E-way bill did not contain the details of the vehicle used for the transport - Held that:- The learned Division Bench of this Court in Renji Lal Damodaran v. State Tax Officer [2018 (8) TMI 1145 - KERALA HIGH COURT] dealt with an identical issue, where it was held that It is directed to release the goods on the appellant furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules. It is directed that respondent authorities to release the petitioner's goods and vehicle on his "furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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2018 (12) TMI 139
Detention of goods - mismatch between the delivery challan and the e-way bill - Held that:- The Department's demand on the petitioner to comply with Section 129(1)(a) cannot be faulted. At any rate, the Department's insisting on both the penalty and tax covering all the set-top boxes cannot be sustained. To be specific, the petitioner has already shown in the delivery challan 200 set-top boxes and mentioned its value as well. So for the remaining boxes, that is 600, the cost was not reflected. - Subject to further adjudication of the issue before the State Tax Officer, the petitioner could provide a bank guarantee and personal bond under Section 129(1)(a) for the amount to be confined to the 600 set-top boxes. Petition disposed off.
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2018 (12) TMI 138
Detention of goods with vehicle - goods detained on the ground Part B of the accompanied e-way bill has not completed - Section 129(3) of GST Act - Held that:- The petitioner may not insist on the provisional release of the goods, but contest the matter before the State Tax Officer. It may then invite an order under Section 129 and 130. Then, Perhaps, every plea including those provided under Section 126 may be available. But if the petitioner desires to have the interim release of the goods, there is no escape from Section 129. As with Section 74, it is evident that the provision concerns the assessment but not transport and its interception, much less the detention and the provisional release. Exts.P5 to P7 notices of detention do not suffer from any legal infirmity - petition dismissed.
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2018 (12) TMI 137
Failure to upload FORM GST TRAN-1 within the stipulated time - input tax credit - Held that:- The petitioner may apply to the additional sixth respondent Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - Petition disposed off.
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2018 (12) TMI 136
Detention of goods with vehicle - misclassification in tax rate - Held that:- The respondent authorities are directed to release the petitioners' goods and vehicle on their “furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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2018 (12) TMI 135
Penalty - Profiteering - benefit of reduction in the price granted - Section 122 (1) (i) of the CGST Act, 2017 - Held that:- The Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoice in which the base price was deliberately not reduced by the amount of CVD, SAD and CST chargeable under erstwhile scenario which is now chargeable as IGST in the GST regime and is available as ITC benefit and thus he had denied the benefit of reduction in the price granted vide IGST provisions to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017. The notice regarding imposition of penalty has already been issued to the Respondent on 11.09.2018. However, the Respondent has not furnished any reply or advanced any arguments on the quantum of penalty to be imposed on him. Keeping in view the principles of natural justice, opportunity of being heard has to be given to the Respondent before the penalty is imposed. Hence fresh notice be given to him to explain why penalty should not be imposed on him. It is clear that the Respondent did not pass on the benefit arising out of the increased ITC in the case of the subject transaction - the possibility of the Respondent having profiteered and thus unfairly benefited in the similar manner, in case of the other supplies affected by him to other customers, cannot be ruled out. We unequivocally opine that a fresh investigation by the DGAP covering all products supplied by the Respondent, within the confines of Section 171 of the CGST Act, is merited to unearth and quantify the benefit that the Respondent has failed to pass on to his customers - The DGAP is directed to initiate investigation against the Respondent in this regard.
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Income Tax
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2018 (12) TMI 134
Contingent liability - provision and a contingent liability - Liability to charge of interest u/s 234B and 234C - Rejection of claim under Section 80G - Deduction of the benefit of 40a(ia) - Leave encashment as a contingent liability - Disallowing expenditure on police stations - Amount paid by the assessee for taking over the company - Claim of capitalization of expenditure towards tree cutting, tampling removal of debris - Regarding removal of debris - Depreciation @ 60% on EDP Equipments - Claim of depreciation on public roads treating the same as building to be allowed - Held that:- Special Leave Petition is dismissed on the ground of low tax effect.
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2018 (12) TMI 133
Reopening of assessment u/s 147 - transfer pricing report by EXL India, which has business connection with the petitioner and the company being situated outside India is not liable to pay tax as contemplated under Section 92-C(A) - Held that:- The proceedings initiated under Section 148 of the Act is based on transfer pricing report by EXL India, which has business connection with the petitioner and the company being situated outside India is not liable to pay tax as contemplated under Section 92-C(A) of the Act. Sri Gaurav Mahajan, learned counsel appearing for the respondents prays for and is allowed three weeks' time to file counter affidavit. The petitioner shall have one week thereafter to file rejoinder affidavit. List thereafter before the appropriate Bench. It shall not be treated as part heard or tied up to this Bench. Till the next date of listing, further proceedings pursuant to notice under Section 148 of the Act with regard to assessment year 2011-2012 shall remain stayed.
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2018 (12) TMI 132
Admission of additional evidence - Whether in the absence of any ground against admission of additional evidence, the Tribunal was right in law in holding that the CIT(A) was not entitled to consider the evidence of payment to the commission agent? - Held that:- There were two premises for the appellate order: first, that the CIT (A) differed from the AO with regard to appreciation of evidence: it was held, in the appellate order, that some discrepancies with respect to the supplier s books and the statements by them could not result in such an adverse finding as to reject the assessee s claims as bogus, and two, that the previous years assessments had showed a consistent pattern with regard to the Revenue s behavior, accepting the assessee s claims regarding the same suppliers and agents. This court is of the opinion that the ITAT s reasoning is not entirely based on the consideration of the fresh evidence under Rule 46-A. It is based on its independent analysis and appreciation of the evidence on record. The assessee s counsel is correct in contending that the powers of the CIT (A) are wide under Section 250 of the Act; that the authority can adduce fresh findings. A close scrutiny of the ITAT s findings impugned in this case, would reveal that the tribunal took note of the assessee s lapses in replying to the AO s specific queries. It then considered the materials on record, in the form of statements made on behalf of M/s RKDNP with regard to what was actually paid. The other findings regarding improbability of such huge amounts remaining outstanding, no interest payable to the commission agent were to bolster the finding that the transactions reported were not credible. AO went to great lengths to find out whether and if any genuine transactions were entered into by its suppliers; the CIT (A) brushed aside those findings based on a solitary instance of export: of rice by another party. However, the findings with respect to the seven supplies and those involved in it- and the statements recorded of representatives of those entities, were a matter of record. What the ITAT did was to analyze the CIT (A) s findings. That it was entitled to do, clearly. And while doing so, it frowned upon the CIT (A) s order to the extent it considered fresh material. However, those observations by no means are the only basis for upsetting the Appellate Commissioner s order; rather they are only asides, so to speak. If those observations are ignored, what is apparent is that the ITAT s findings are based on an independent analysis of the AO s reasoning While the CIT (A) could have considered the previous orders (of the revenue relating to past assessments) they could not have been the main bases for reversing the AO s order. The ITAT s impugned order, it is noticeable, is not based on the so called infirmity attached to the CIT (A) s order; it is based on its own overall analysis of the evidence. Those are clearly findings of fact, which do not indicate any unreasonableness or other infirmity, calling for interference. - Decided in favour of the revenue
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2018 (12) TMI 131
Reopening of assessment - disallowance of expenditure under section 14A of the Act read with rule 8D had not been correctly worked out - Held that:- AO has not accepted the objections raised by the audit party and on the contrary, has objected to such objections by communicating internally as referred to hereinabove. Evidently therefore, the Assessing Officer has not formed any independent belief that the income chargeable to tax has escaped assessment and on the contrary has stated that he had considered the applicability of provisions of section 14A and was satisfied in adopting 0.5% of average value of investment for disallowance under section 14A of the Act. It is by now well settled that the assessment cannot be reopened merely on the basis of an audit report without the Assessing Officer independently forming the belief, may be on the basis of such report, that income chargeable to tax has escaped assessment. The above referred decision would, therefore, be squarely applicable to the facts of the present case. The impugned notice issued by the respondent under section 148 of the Act being based merely upon the audit objection and not because the Assessing Officer had reason to believe that any income chargeable to tax has escaped assessment, cannot be sustained. - Decided in favour of assessee.
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2018 (12) TMI 130
Reopening of assessment - reasons for reopening the case - reassessment notice is solely based on an audit opinion - Held that:- This Court is of the opinion that Carlton [2009 (8) TMI 57 - DELHI HIGH COURT] concludes the issue in the present case; the audit objection merely is an information. As reiterated in Kelvinator [2010 (1) TMI 11 - SUPREME COURT OF INDIA] by the Supreme Court, change of opinion is impermissible. The Revenue was clearly barred by provisions of Section 147/148 of the Act. In the present case, the reassessment notice is solely based on an audit opinion. Having regard to the fact that the assessee’s challenge to the previous year’s re-assessment orders was successful - in FIS Global Business Solutions India Pvt. Ltd. v. ACIT [2018 (11) TMI 601 - DELHI HIGH COURT] the reassessment proceedings are unsustainable - the impugned re-assessment notice dated 31.03.2018, cannot be sustained - Decided in favour of assessee.
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2018 (12) TMI 129
Revision u/s 263 - grant of exemption u/s 54F for four residential units purchased by utilizing the assessable capital gains is incorrect and the re-assessment order was erroneous and prejudicial to the interest of revenue - Held that:- In the process of considering as to what relief the assessee is entitled to, AO held that the assessee is entitled to claim deduction under Section 54F and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous. AO while completing the re-assessment proceedings has assigned certain reasons for coming to a conclusion that the assessee is entitled for deduction under Section 54F and not under Section 54 of the Act. This reason assigned by the AO has been found by us to show due application of mind. As observed, we cannot expect an AO to write a judgment. Commissioner in his order u/s 263 has to be termed as a change of opinion, or in other words, the Assessing Officer adopted one of the two views possible and in such circumstances, it cannot be stated that the order is prejudicial to the interest of the Revenue as well as erroneous. For the purpose of exercise of jurisdiction under Section 263 the twin tests are to be satisfied and even assuming, the reassessment order is to be held as erroneous, it cannot be stated to be prejudicial to the interest of Revenue as every erroneous order cannot be subject matter of Revision under Section 263. Further more, if the order passed by the Commissioner under Section 263 of the Act as confirmed by the Tribunal is allowed to stand, then the very purpose of the remand order against the original re-assessment proceedings would become a fait accompli. Thus, we are fully satisfied that the assumption of jurisdiction by the Commissioner under Section 263 of the Act was wholly without jurisdiction as the twin tests have not been satisfied and consequently, the order dated 14.03.2012 as confirmed by the Tribunal by order dated 13.07.2012 calls for interference. In the result, the appeal filed by the assessee is allowed and the order passed by the Commissioner dated 14.03.2012, under Section 263 as confirmed by the Tribunal by order dated 13.07.2012 are set aside, and it is left open to the assessee to pursue her claim before the Assessing Officer. - Decided in favour of the assessee.
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2018 (12) TMI 128
Deduction u/s 80-P(2) and 80- P(2)(c)(ii) - income from the sale of Public Distribution System sales as directed by the Government of Tamil Nadu - Held that:- Following the decision in the assessee's own case for the earlier Assessment year [2011 (7) TMI 1341 - ITAT CHENNAI], this Appeal is allowed and the above tax case appeal is allowed, the orders passed by the Authorities below are set aside and the substantial question of law framed is answered in favour of the assessee. The Assessing Officer is directed to extend the benefit of deduction under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act to the appellant/assessee. - Decided in favour of assessee
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2018 (12) TMI 127
Deduction under Section 80P(2) - income from the sale of public distribution system sales as directed by the Government of Tamil Nadu - Held that:- In the instant case, the Revenue has not disputed the fact that the fair price shops were opened based on the directions issued by the Government of Tamil Nadu as communicated by the Registrar of Cooperative Societies and the District Collector. We find that in the decision in Citizen Cooperative Society Limited [2017 (8) TMI 536 - SUPREME COURT] the assessee was engaged in granting loans to general public without any approval from the Registrar of Societies. Therefore, the Court held that the assessee could not be treated as a cooperative society meant only for providing credit facilities to its members and accordingly, would not be entitled to claim the benefit under Section 80P of the IT Act. This decision can, in no manner, advance the case of the Revenue, as factually we found that the assessee herein is entitled to distribute the items under the PDS, as it is one of the allied activities of the society and is bound by the directives of the Government. Apart from that, the definition of 'credit society' is wider in import to include any activity that the Government may, by Notification, specify. As find from By-law No.12(a) that if the society carries on an activity, which is not authorized under the By-laws or with the approval of the Registrar, the society is liable to strike off the Rules and the members engaged in the same are liable to be removed. Furthermore, in terms of Bylaw No.51, the society is entitled to purchase, in bulk, articles and materials required for its members and distribute the same. Therefore, viewed from any angle, the activity done by the appellant society cannot be truncated from the activity as a credit society and we are of the considered view that the Authorities below as well as the Tribunal committed an error in rejecting the stand taken by the appellant/ assessee - AO is directed to extend the benefit of deduction under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act to the appellant/assessee. - Decided in favour of assessee.
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2018 (12) TMI 126
Reopening of assessment - assessment in the name of Legal representatives - assessment against dead person - validation of proceedings u/s 292B r.w.s. 292BB - Held that:- Notice for re-opening u/s 148 was issued on 25.03.2013, i.e. within time to the deceased-assessee through his legal heirs. The notice was sent through speed post. The same was returned by stating that the assessee had died about 6-7 years ago. It is not disputed that the address was correct. The act of returning the notice was deliberate inspite of the fact that notice was not in the name of Yoginder Singh but Yoginder Singh through his legal heirs. The legal heirs of the assessee filed a reply dated 16.01.2014 stating that notice under Section 143(2) of the Act was time barred. The assessment proceedings were attended by Neeraj Jain, Chartered Accountant and he submitted that no notice had been served u/s 148 for the assessment year 2006-07. The finding recorded has not been disputed that after issuance of notice under Section 148 of the Act, notice under Section 143(2) alongwith questionnaire was issued and the same was served. The final show cause notice was issued which was served through affixation on 04.02.2014. The legal heirs participated in the assessment proceedings but never filed any reply on the merits of the issue. The objection raised regarding non-receipt of notice under Section 148 was rightly rejected by the A.O. The order passed by the Tribunal allowing the appeal on the ground that re-assessment order had no validity being passed in the name of dead person and that notice under Section 148 of the Act was not served upon the deceased-assessee or legal heirs, is not-sustainable.
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2018 (12) TMI 125
Denial registration u/s 12AA - non filing of return of income - proof of charitable activities - Whether the term 'such documents' would not include returns of income for the purpose of determination of genuineness of activities of a Trust? - Held that:- As noticed that the assets of the assessee, i.e., its land and building etc. had been created out of the donations received for the setting up of the school of the society and the objection of the CIT(E) that the assessee had amassed capital funds to the tune of ₹ 5.59 crores and fixed assets to the extent of ₹ 5.85 crores neither impinged on the objects nor the genuineness of the activities of the assessee. The object of the society is 'To Promote the Quality and Scope of Education in Rural Area and Manage the affairs of Sadhu Singh Rural Public School, Mukand Pur.' Therefore, the contention of the assessee that the corpus got created from such donations as received for the setting up of the school, had not been rebutted by producing any material to the contrary on record. Regarding creation of assets, the Tribunal had recorded nothing had been brought on record to show that the assets of the assessee were meant for any purposes other than its aims and objects which included managing the affairs of the school and that as per the balance sheets, the entire expenditure incurred by it had been for the purposes of school only. Further, at the time of considering the grant of registration, only the objects and genuineness of the activities of the assessee were to be got verified. Accordingly, the Tribunal correctly directed the CIT (E) to grant registration to the respondent - decided against revenue
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2018 (12) TMI 124
Application for registration u/s 12AA denied - Trust can be utilized for personal benefits of the Trustee which could be even commercial in nature - Held that:- Assessee Trust having been constituted to carry out the charitable activities is entitled for registration u/s 12AA and consequent approval u/s 80G but the ld. CIT (E) has erred in declining the registration u/s 12AA of the Act on the basis of conjectures and surmises that the Trust can be utilized for personal benefits of the Trustee which could be even commercial in nature without having any material on file in this regard, which is not sustainable in the eyes of law. Consequently, appeals filed by the assessee are allowed directing the ld. CIT (E) to provide registration u/s 12AA to the assessee and also to grant consequent approval u/s 80G of the Act. - Decided in favour of assessee.
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2018 (12) TMI 123
Rejecting books of accounts - holding the purchases shown by the assessee as bogus - Held that:- Admittedly, assessee’s method of accounting has been accepted in preceding AY and in our opinion, unless there is contrary material available on record method consistently followed by assessee cannot be rejected without any basis. We therefore agree with observation of CIT (A) that accounts regularly maintained in course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. We therefore uphold the view of CIT(A) in accepting books of account of assessee. Insofar as addition regarding estimation of sales, job work income and other income, it is observed that Ld.A.O. has not given any reason for estimation. CIT(A) has recorded that even during remand proceedings A.O. has not made any enquiries and no comments have been given regarding books of accounts maintained by assessee. It is very much categorical to observe that sales has not been doubted by A.O. AO observed therein that, mere filing PAN numbers or assessment particulars, VAT returns and copy of sales tax RC etc., do not establish identity of persons. He further notes that actual and true identity of persons or company was business undertaken by them. PAN numbers/registration of VAT are allotted on basis of application, without actual defacto verification of identity or ascertaining actual nature of business activity, and therefore cannot be blindly accepted. On further perusal of the remand report it is observed that AO himself has not taken up any steps to verify these details. In our considered opinion moment assessee filed various details regarding sellers, onus shifts upon AO to verify the same at his end. Further it is observed that assessee has been having a progressive profit ratio from the preceding assessment years. - decided against revenue.
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2018 (12) TMI 122
Charitable activity - assessee fails to qualify as an organization for charitable purpose - rectification of mistake u/s 154 - Held that:- It is clear from the order u/s 143(3) of the Act that the learned AO did not refer to the entire activities of the assessee in respect of its units but there is a specific reference to CIRT, Pune and its activities. Ultimately, the surplus attributable to CIRT, Pune to the tune of ₹ 63,15,340/- was brought to tax. As observed in T.S. Balram vs Volkart Bros. (1971 (8) TMI 3 - SUPREME COURT) and CIT vs. Sheshasayee Paper and Boards Ltd. (2006 (1) TMI 75 - MADRAS HIGH COURT) the debatable issue does not fall under the purview of Section 154 of the Act and also the long drawn process of reasoning on points on which there could be two opinions, by resorting to Section 154 of the Act is impermissible. With this view of the matter, we are of the considered opinion that the order of the learned CIT(A) in quashing the order u/s 154 of the Act does not suffer any illegality or irregularity and it does not warrant any interference by this Tribunal. We, therefore, uphold the order of the learned CIT(A) in quashing the order u/s 154. The assessee does not stand to gain by withdrawal of the appeal and getting it dismissed as withdrawn, simply because the result in the appeal preferred against the order u/s 154/143(3) does not wipe out the liability of the assessee under the order u/s 143(3) of the Act. Further when the technical consideration is pitted against the delivery of substantial justice, it is a settled principle of law that the former must give way to the latter. Above all, by affording an opportunity to the assessee, the highest that would happen is that a cause could be decided on merits. Since the learned CIT(A) had not considered the case of the assessee on merits, we are of the considered opinion that it is a fit case to set aside the impugned order and remand the matter back to the file of the learned CIT(A) for disposing it off on merits.
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2018 (12) TMI 121
Rectification of mistake 154 - exemption u/s 54F - Held that:- Invoking of the provisions of section 154 of the income tax act it is apparent that the learned assessing officer was not considering the issue of the cost of the residential house, but the provisions of section 54EC of the act. We are of the opinion that even in the show cause notice the AO has not noted that the assessee has shown the incorrect cost of residential house property. AO is to pass detailed order to show that certain cost of gadgets have been included by the assessee in the cost of residential house property for claiming exemption under section 54F of the act. We are of the opinion that the impugned adjustment that is proposed to be made by the learned assessing officer to the total income of the assessee is not on account of mistake apparent from record. In view of this we are not inclined to uphold the order of the learned assessing officer so far as it relates to the adjustment on account of the capital gain is chargeable to tax by tweaking the cost of the residential house property. Accordingly, the ground number 1 of the appeal is allowed. Whether deduction u/s 54F will include the expenditure incurred by the assessee on account of heater, air conditioner and home kitchen - Held that:- As we have already quashed the rectification notice issued by the assessing officer to the extent of adjustment to the capital gain computed by the assessee. Accordingly, same is dismissed.
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2018 (12) TMI 120
Addition made on the basis of material collected at the back of the assessee - non giving an opportunity to assessee to rebut the same - violation of the principle of natural justice - Held that:- We find considerable cogency in the contention raised by the assessee’s counsel that addition was made on the basis of material collected at the back of the assessee without giving him an opportunity to rebut/cross examine the same, which was also raised before the Ld. CIT(A), who wrongly held that when the appellant has failed to appear before AO for the personal deposition u/s. 131 of the I.T. Act and now the assessee is claiming opportunity of cross examination and wrongly upheld the AO’s order, which is not proper. Exactly on the similar facts and circumstances in the case of Smt. Jyoti Gupta vs. ITO [2018 (11) TMI 1353 - ITAT NEW DELHI] wherein, the SMC Bench has considered the statement of Vikrant Kayan and has held that since the impugned addition was made on the statement of Sh. Vikrant Kayan without providing any opportunity to the assessee to cross examine the same and Ld. CIT(A) has not considered the same ground, which is in violation of principle of natural justice and against the law laid down in the case of Andaman Timber vs. CIT [2015 (10) TMI 442 - SUPREME COURT] - Decided in favour of assessee.
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2018 (12) TMI 119
Penalty u/s 271C - Bona fide reasons for not deducting TDS - Held that:- From the perusal of the Section 271C, if there is a failure to deduct tax at source then such person is liable to pay the penalty under this section. Merely being under bonafide belief that the tax was not deducted at source will not be a ground for exonerating the assessee from the provisions of this section. The case laws referred by the Ld. AR will also not be applicable in case of assessee as the same are on different footing and facts. Therefore, we are not inclined to interfere with the findings of the CIT(A). Hence, appeal of the assessee is dismissed.
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2018 (12) TMI 118
Addition on the basis of 12% profit element in the closing work in progress - Held that:- Considering the totality in this case and the fact that the ad hoc addition has been made on the premise that the assessee failed to furnish details, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to verify the assessee’s details and seek any other further details, if required, for enabling him to complete the assessment in right perspective. Addition on account of rental income and disallowance of proportionate depreciation allowance and insurance expenses - Held that:- As observed that the assessee admittedly earned rental income of ₹ 1,25,000/-, which was accepted during the course of survey. In that view of the matter, inclusion of ₹ 10,50,000/- as income from house property, cannot be faulted with. Disallowance of expenses - Held that:- The assessee has placed on record a chart showing the use of its office premises by Phinix Shelter Pvt. Ltd., other group entities and self. This chart indicates that the assessee used only 30% of the office premises for its business purpose and remaining 70% was used by Phinix Shelter Pvt. Ltd. and other related entities. Section 38(2) of the Act provides that where any building etc. is not exclusively used for the purpose of business, the deductions under relevant clauses of sections 30, 31 and 32 shall be proportionately reduced. Once it is found as an admitted position that the assessee was using only 30% of the premises, it is but natural that the disallowance in respect of depreciation and other expenses to the extent of 70%, being, relatable to the part not used by the assessee exclusively for its business purposes, cannot be faulted with. Addition towards interest - Held that:- The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders’ funds, presumption stands established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds - Addition as the amount of net advances to the sister concerns is less than the amount of share capital and free reserves.
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2018 (12) TMI 117
TDS u/s.194H - incentives paid to the employees - TDS liability - Held that:- CIT(A) gave a categorical finding that the incentives paid to the employees are not subjected to TDS u/s.194H and there is no question of change of nomenclature and the incentives given to the employees by the assessee are found to be correct, hence the same is allowed. It is brought to our notice the detailed statement on incentive distribution among its employees. The total payment including salaries are below the threshold limits. CIT(A) has called for remand report from AO and AO has not disputed the actual expenditure but expressed his views that the assessee has changed the nomenclature of the expenses to incentives. CIT(A) has allowed the assessee’s appeal. Therefore, we do not find any infirmity in the order of CIT(A) and hence, upholding the same, we dismiss the grounds raised by the revenue on this issue. Disallowance towards ESIC and PF contributions - AO observed that since the assessee failed to substantiate its claim before him, made disallowance u/s 36(v)(a) for non payment of ESIC and PF before the due date - Held that:- It is a settled position of law that though the assessee paid the contributions towards ESIC and PF beyond the due date, but, before filing of the return of income, no disallowance can be made in this regard. The Hon’ble Delhi High Court in CIT VS. Aimil Ltd. & Ors. [2009 (12) TMI 38 - DELHI HIGH COURT] has held that if the employees’ share of contribution is paid before the due date of filing the return u/s 139(1) of the Income-tax Act, 1961 then no disallowance can be made. Accordingly, we uphold the order of CIT(A) on this count and dismiss the grounds raised by the revenue. - decided against revenue.
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2018 (12) TMI 116
TDS u/s 195 - payment of professional fees outside India - non deduction of tds - disallowance u/s 40(a)(ia) - income accrued in India - PE in India - Held that:- As decided in assessee's own case [2013 (11) TMI 188 - ITAT MUMBAI] none of these payments which were not liable or chargeable to be taxed in India, no TDS was required to be deducted under section 195, therefore, the findings given by the Commissioner (Appeals) is factually and legally correct and, accordingly, the same is hereby affirmed. Ground raised by the Revenue is, thus, dismissed.
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2018 (12) TMI 115
Charitable activities - exemption u/s 11 denied - assessee is charging fees and receiving grant the assessee is carrying on business and therefore is not eligible for exemption - whether the activities of the assessee is hit by the amendment made to section 2 (15) of the income tax act or not? - Held that:- The assessee is a society in the field of science and technology and the income of the society has been exempted from tax under section 10 (21) of the income tax act for each approval was granted earlier. Undisputedly the assessee is also registered under section 12 AA of the income tax act. The objectives of the assessee are already set out earlier. The activities of the assessee are spread all over India for the common benefit of public at-large and it provides act addition to testing and calibration laboratories in a nondiscretionary manner regardless of their ownership, legal status, size and degree of independence and other activities such as to plan, prepare, develop and disseminate certified reference materials for enhancement in quality and accuracy et cetera of testing, calibration, research and development of laboratories. The learned departmental representative could not point out any infirmity in the order of the learned Commissioner of income tax appeals which is following the decision of the jurisdictional High Court in case of ICAI vs DGIT [2013 (7) TMI 205 - DELHI HIGH COURT]. No infirmity in the order of the learned Commissioner of income tax appeals and confirm his finding. Therefore assessee is eligible for exemption under section 11 and 12 of the income tax act and is not hit by the proviso to section 2 (15) of the income tax act. - Decided in favour of assessee
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2018 (12) TMI 114
Write off of debts under the Debt Waiver Scheme - claim of exemption of the same income in the earlier year or made double claim in the earlier years with regard to bad debts or NPAH - eld that:- The assessee should not claim double deduction under the waiver scheme as well as the exemption of the income or bad debt for the same amount in the earlier years. Therefore, this issue needs detailed verification at the end of the AO, hence, we remit the matter back to the file of the AO to allow additional relief of 25% OTS after verifying whether the assessee has claimed the exemption of the same income in the earlier year or made double claim in the earlier years with regard to bad debts or NPA and decide the issue afresh on merits. The AO should give reasonable opportunity to the assessee before deciding the issue and the assessee is directed to furnish the details. Accordingly, the appeal of the revenue on this ground is remitted back to the file of the AO for fresh consideration and this ground is allowed for statistical purpose. Waiver of penal interest and other interests as expenditure u/s 31(1)as per schemes announced by the APCOB and KBCCB - Held that:- The claim of the assessee was in all cases the waiver of interest on over due and sticky loans and the assessee submitted that such interest was never claimed as expenditure in the earlier years. Though there was change in the nomenclature the waiver and written off was interest and stated to be admitted as income in the earlier years. The assessee submitted that there was no double claim made by the assessee. The department did not bring any evidence to show that the assessee has made double claims of the deduction. Since facts of the case are identical to the assessee’s own case in appeal of this tribunal respectfully following the view taken by the coordinate bench of this tribunal we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue on this grounds for the A.Ys 2011-12 to 2014-15.
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2018 (12) TMI 113
TP adjustment on account of ALP of reimbursement of AMP prices applied BLT - whether BLT applied by TPO/DRP in this case is an appropriate method for determining the international transactions ? - Held that:- When the BLT method adopted by the TPO incurring the AMP expenses by following the ratio of LG Electronics India Pvt. Ltd. [2013 (6) TMI 217 - ITAT DELHI] decided by Special Bench of the Tribunal, has been held to be not legally sustainable by the Hon’ble Delhi High Court in series of judgments, the entire exercise of determining AMP expenses as international transaction by the TPO is without any basis, hence not sustainable. Following the decision rendered by Hon’ble Delhi High Court in taxpayer’s own case for AY 2008-09, we are of the considered view that TP adjustment of involving AMP expenses is not sustainable in the eyes of law, we are of the considered opinion that the ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law, hence Grounds determined in favour of the taxpayer. 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. Addition u/s 37 - large amount incurred by the taxpayer as AMP expenditure was not for the purpose of business of the taxpayer - Held that:- when the issue as to ALP adjustment of AMP expenses has already been dealt with and decided in favour of the taxpayer in view of the series of decisions rendered by Hon’ble Delhi High Court u/s 92 of the Act, the same AMP expenses cannot be dealt with u/s 37 of the Act which would amount to double addition if the addition made u/s 92 of the Act found to be sustainable. So, when ALP adjustment of AMP expenses is found to be not sustainable for lack of existence of any international transaction between taxpayer and AE, the same also cannot be brought to tax in the alternative u/s 37 of the Act. Consequently, ground determined in favour of the taxpayer.
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2018 (12) TMI 112
Receipts on account of “Sale of Software” - chargeability to tax as income from Royalty u/s 9(1)(vi) and Article 12 of the DTAA - India-Ireland DTAA - Held that:- Respectfully following decision of Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT] we hold that receipts derived by the assessee from “Sale of Software” is not in nature of “Royalty” as defined under Article 12 of India-Ireland DTAA. Since treaty provisions are more beneficial, an adjudication on nature of receipts vis a vis provisions of Section 9(1)(vi) is not required. Levy of interest u/s 234 - Held that:- Since the receipt itself is not liable to tax in India interest u/s 234B will be consequential.
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2018 (12) TMI 111
TP Adjustment on account of Advertisement, Marketing and Promotion Expenses - BLT method adopted by the TPO incurring the AMP expenses - Held that:- When the BLT method adopted by the TPO incurring the AMP expenses by following the ratio of LG Electronics India Pvt. Ltd. [2013 (6) TMI 217 - ITAT DELHI] decided by Special Bench of the Tribunal, has been held to be not legally sustainable by the Hon’ble Delhi High Court in series of judgments, the entire exercise of determining AMP expenses as international transaction by the TPO is without any basis, hence not sustainable. We are of the considered opinion that the 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 - Appeal filed by the assessee is allowed pro tanto.
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2018 (12) TMI 110
Addition on bogus purchase bills - corroborative evidence to prove that assessee company has inflated the expenditure by passing accommodation entries - Held that:- From the record we found that the Statement recorded on 21/11/2011 were duly retracted on 1/12/2011 i.e within one month. Further said retractions were conveyed to the survey team on 12/3/2012 i.e before the survey report and to the AO on 14/3/2012 i.e before any proceedings were initiated by the A.O. Hence, retraction being on affidavit was legal and valid and was not belated. Further retraction was supported by explanation of impounded documents to the Survey team. The impounded document did not contain any information which was not recorded in the books of accounts. No addition can be made merely on the basis of statement unless same is corroborated by documentary evidence. From the record we also observe that corresponding income booked by the assessee has not been disputed by lower authorities meaning thereby, income earned corresponding to the expenditure alleged to be bogus has been duly accepted by the lower authorities. Entire expenditure so incurred which is duly supported by income declared by assessee and accepted by Department cannot be declined. Taking average profit declared by the assessee in the earlier five years which is 12.99% it is very relevant to find out if any lower income has been shown by the assessee in any of the years to ascertain the additions warranted - addition can be restricted to the difference in gross profit declared by the assessee during the years under consideration as compared to the average gross profit rate of earlier five years which is 12.99%. - Decided partly in favour of assessee.
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2018 (12) TMI 109
TDS u/s 195 - payments made to non-residents - non deduction of tds - assessee filed certain documents in support of his contention that the payments made to non-residents were not towards any services performed by them within India and that they do not have any permanent or temporary establishment in India - Held that:- On going through the material, we find that the documents prove that the services were rendered by the agents outside India and therefore, their commission income is not taxable in India. However, since these documents are filed for the first time before us, we deem it necessary to admit these documents and remit the issue to the file of the AO for reconsideration in accordance with law after verification of the documents. Needless to mention that the assessee shall be given a fair opportunity of hearing. - Decided in favour of assessee for statistical purposes.
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2018 (12) TMI 108
Rectification of mistake u/s 154 - allowance of reduced rate of depreciation - a debatable issue to invoke section 154 - AO allowed 15% of depreciation on trucks owned by the assessee as against 30% claimed by the assessee - Held that:- In this case, there was no record attached to the return of income to show that the claim of higher depreciation on trucks is to be allowed at 30% claimed by the assessee instead of 15%. The profit and loss accounts or other documents attached to the return of income does not show that the assessee has used the trucks for giving it on hire. This fact is also confirmed by the Ld. AR at the time of hearing by stating that the assessee has not shown hire charges in its books of account. Hence, it is apparent mistake committed by AO while framing the assessment order u/s. 143(3) of the Act dated 28/03/2004 and allowed depreciation at 30% as claimed by the assessee instead of deductible depreciation at 15% - the apparent error has arisen from the records of the case and it was not discovered from other sources. Hence, the error discovered as a result of perusal of the records would constitute apparent error which conferred jurisdiction on the concerned Assessing Officer to rectify the earlier order. It follows from this that the evidence which was considered by the Assessing Officer to rectify the error is not extraneous to the record but it is intimately connected with the records. Hence, exercising jurisdiction u/s. 154 of the Act by the Assessing Officer is justified - no infirmity in the order of the Assessing Officer to allow depreciation on trucks at 15% instead of 30% claimed by the assessee - Decided against assessee.
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2018 (12) TMI 107
Short deduction under section 194D - service tax liability in the hands of the assessee, is not income of the agents and no TDS is liable to be deductible on the income - Held that:- As decided in the case of assessee itself [2016 (12) TMI 181 - ITAT MUMBAI] the amount of service tax on the insurance commission to life insurance agents is the liability of the appellant and the same cannot be considered as income in the hands of the agents. Hence, no tax is required to be deducted at source under Section 194D of the Act, on the service tax component. Accordingly, the demand of tax of ₹ 6,45,82,054/- (as rectified by the AO) u/s 201 (1) of the Act on account of non-deduction of tax at source u/s 194D of the Act on service tax component of the Insurance commission paid to/ credited in the name of Insurance agents is hereby directed to be deleted. TDS u/s 194C or 194J - nature of services received by the assessee by incurring outsourcing fee operation and record storage expenses as data sorting, scanning, retrieving of records, which requires certain parameters of technical/managerial skill and falls within the purview of section 194J or 194C - Held that:- As following the decision of coordinate bench on the similar facts we do not find any infirmity in the order of Ld. CIT(A) holding that annual maintenance charges paid by assessee was liable for deduction of tax at source under section 194C and not under section 194J TDS on payments of annual maintenance contract/routine repair - tds u/s 194J or 194C - Held that:- Assessing Officer while framing the order under section 201(1) of the Act held that the assessee is liable to deduct tax at source on payments of annual maintenance contract/routine repair under section 194J as the same was in the nature of technical services and thus, assessee wrongly deducted tax at source under section 194C whereas the learned CIT(A) followed the order of the Tribunal and also the decision in the case of RELIANCE LIFE INSURANCE CO. LTD. [2016 (5) TMI 1254 - ITAT MUMBAI]as deliberated upon by the Tribunal. No contrary decision was brought to our notice. Thus, following the decision of the co-ordinate Bench, we affirm the stand of the learned CIT(A), resulting into the dismissal of the appeal of the Revenue. So far as ground no.5 is concerned, it is general in nature requires no deliberation from our side. - Decided against revenue
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2018 (12) TMI 106
Disallowance of depreciation in respect of property acquired by the assessee - building was not put to use during the year - date on possession of property received - Held that:- From the record, we found that the assessee had purchased the office premises. The said premise was handed over by the builder to the assessee on 29/6/2011. The objection raised by the AO that the possession letter dated 29/6/2011 refers to the registered document dated 6/7/2011 is only a technical issue. The possession was handed over on 29/6/2011 and thereafter the letter was issued by the builder by referring to the registered document. Besides this the assessee has provided various other documents in the form of maintenance bills, amenities bill, shifting of files, parking space letter, computer installation report, registration with government authorities, etc. These documents are acknowledged by third party. The documents have not been doubted by the AO. We also found that the assessee had applied to TATA power and the assessee has provided bill for January and February 2012 to the AO. The assessee has provided the computer installation and - testing report and also the certificate from the Deputy Director of industries to prove that the assessee had commenced business from the said premises on 1st August 2011. Thus we observe that assessee has beyond doubt proved that the assessee was the owner of the office premises and had used the said premises during the previous year from 1/8/2011. - Decided in favour of assessee.
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2018 (12) TMI 105
Disallowance of expenses u/s 14A r.w.r. 8D(2)(iii) - non recording of satisfaction - Held that:- there is no satisfaction recorded by the AO despite the fact that the assessee has computed the expenses relatable to exempt income in a scientific manner and once there is no satisfaction recorded by the AO, no disallowance can be made. Hence, we confirm the order of CIT(A) deleting the disallowance. The appeal of Revenue is dismissed.
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2018 (12) TMI 104
Disallowance of payment made to relatives of the Directors under section 40A(2)(b) - payment of salary paid has been treated as excessive by ₹ 6 lakhs - Held that:- AO has not pointed out any defect in the submission of the assessee. In our considered view the AO before comparing the salary with other directors, should have also considered experience, qualification and technical competency, which has not been done in the instant case. It is also the fact on record that the salary paid to Shri Shivendra Singh was taxed at the maximum marginal rate, meaning thereby both the assessee and Shri Shivendra Singh were being taxed at the same rate. Therefore, it can be concluded that there is no evasion of tax liability. We find that under similar circumstances in the case of PCIT Vs. Gujarat Gas Financial services limited [2015 (7) TMI 743 - GUJARAT HIGH COURT] has held that if salary paid to the specified persons mentioned in section 40A(2)(b) of the Act and same is charged to tax at the maximum marginal rate, then no disallowance can be made. - decided in favour of assessee. Addition in part on account of sales commission expenses - Held that:- From the preceding discussion, we note that the assessee has created the provisions for commission expense in the earlier years as evident from the copy of ledger available on page no.16 of the paper book. However, the accounts were settled with the party at ₹ 1,40,000/- during the year under consideration. Therefore the excess sum of ₹ 5,000/- was claimed as commission expenses for the year under consideration. On perusal of the ledger account of the commission, there remains no ambiguity that the provision for commission expenses of ₹ 1,35,000/- was not claimed as a deduction in the year under consideration as alleged by the ld.CIT(A). Once the expenses of ₹ 1,35,000/- has not claimed in the books of accounts, then there is no question making disallowance of such expenses. Therefore, we hold that the ld.CIT(A) has misunderstood the facts of the case and made disallowance of ₹ 1,35,000/- treating the same as provision for commission expenses. - decided in favour of assessee. Ad hoc disallowance at the rate of 25% of the total traveling expenses - Held that- it is clear that the AO has not pointed out any specific defects in the expenses claimed by the assessee. In these circumstances, we are of the view that the estimated disallowance is not sustainable in the eyes of the law. In this connection, we also rely on the order of Coordinate Bench of ITAT Kolkata in the case of Animesh Sadhu Vs. ACIT [2014 (11) TMI 1170 - ITAT KOLKATA]. Hence we delete the addition made by the lower authorities. Hence, this ground of appeal of the assessee is allowed.
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2018 (12) TMI 103
Computation of capital gains u/s 48 - expenditure not incurred wholly and exclusively in connection to the transfer of the property - Held that:- Matter requires reconsideration at the level of the A.O. A.O. has examined the issue in the light of Section 48(i) and noted that except brokerage paid and transfer fee, other expenditure were not incurred wholly and exclusively in connection to the transfer of the property. A.O. did not examine the issue whether interest was paid on borrowed capital which was used for acquisition of the asset. No details have been mentioned in the impugned orders and even no specific details have been referred to during the course of arguments. Therefore, interest of justice requires that the matter should be re-examined by the A.O. in the light of contention of the assessee, in the light of provisions of Section 48(ii) and the decision relied upon by the Learned Counsel for the Assessee. Set aside the orders of the authorities below on this issue and restore the matter in issue to the file of A.O. with a direction to re-decide the above issue strictly on merits, as per law, by giving reasonable, sufficient opportunity of being heard to the assessee. Initiation of re-assessment proceedings under section 147/148 - Assessee stated that he is not in a position to argue this ground because he is not having even copy of the reasons recorded under section 148 - In the absence of any material on record and any serious challenge to the issue of re-assessment proceedings, no interference is called for in the order of the Ld. CIT(A) in rejecting this ground of appeal of assessee. - Decided partly in favour of assessee
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Customs
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2018 (12) TMI 93
Advance licenses - Fulfillment of condition of N/N. 203/92-Cus - who is liable to fulfill the condition of notification, the original licensee or the “transferee” of the licensee? - Held that:- The licence have been obtained by the exporters of garments are leather goods and unfulfilments of export allegation. The same had been transferred to the appellants on fulfilment of export obligations. The said transfer was duly authorised by the appropriate authority i.e. DGFT. In the absence of any allegation regarding forgery are falsification of the said licence or transfer of such licence, it is to be presumed that the appropriate authority i.e. DGFT had satisfied themselves about the fulfilment of condition of the N/N. 203/92-Cus. by the exporter. Any way onus to prove that input stage credit was not availed in respect of the goods exported is not certainly on the “transferee” the licence i.e. appellants - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 76
Provisional release of seized goods - reduction in the amount of bank guarantee required for the provisional release - Valuation - enhancement of value based on NIDB data - Held that:- It is quite evident that the value that have been declared by the importer, has been enhanced as per NIDB data at the time of assessment of the consignments - there are no alternative, but to accept the same for the purposes of provisional release of the goods. The appellant is therefore directed to execute the bond of the enhanced value as per adjudication order backed by the Bank Guarantee of ₹ 20 lakhs in case of Bill of Entry No.30033470 and ₹ 15 lakhs for Bill of Entry No.3081944 - On Execution of Bond and Bank Guarantee as above, the Adjudicating Authority shall grant the provisional release of the consignment. The appeal filed by the Appellant is restored and disposed off in the above manner.
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Corporate Laws
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2018 (12) TMI 99
Compounding of offence - exercise of powers under Section 482 of Code of Criminal Procedure - Held that:- Merely on the ground that the embargo laid down under Section 320 of Code of Criminal Procedure may not be applicable to the provision of Section 24A, it cannot be said that without the consent of SEBI the proceedings can be compounded. Or else the statutory authority will be rendered to be a mute spectator in the event of such an application is preferred by the accused for compounding. The discretion lies with the Court as well as with the prosecuting agency. The nature of the dispute which is the subject matter of the prosecution initiated by Respondent No.1 against the applicant/accused is not a private individual dispute. The prosecution is initiated for violations of the order passed by the Adjudicating Officer. Adjudicating Officer was required to pass such an order in the light of the factual matrix and for the reasons stated in the adjudication order. It cannot be accepted that the proceedings were in the nature of recovery and therefore the application for compounding ought to be allowed. The Special Judge has rightly rejected the application. The factual aspects and for all the reasons stated herein I am not inclined to allow the application for compounding in exercise of inherent powers under section 482 of Code of Criminal Procedure when the Respondent No.1 has not consented for compouding the said offence. Considering the aforesaid circumstances and more particularly in view of the observations of the Division Bench of this Court in the case of Shilpa Stock Broker [2013 (9) TMI 656 - HIGH COURT OF BOMBAY] and also in the light of scope powers of Respondent No.1 being the regulatory authority or the statutory authority it cannot be said that the proceedings can be compounded in the absence of the consent of Respondent No.1. I do not find any infirmity in the order passed by the Special Court rejecting the application preferred by the petitioner. Considering factual the matrix and the observations made herein above even in exercise of powers under Section 482 of Code of Criminal Procedure, I am not inclined to grant any relief as prayed in the present petition. Hence, petition is devoid of merits and the same is dismissed.
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2018 (12) TMI 96
Execution of consent decree - winding up petition - whether, after the commencement of the winding up proceedings, the appellant and the Company, could have entered into consent terms, secured a consent decree and on such basis appropriated amount of over ₹ 10 Crores from coffers of the respondent No.2 Company, in preference to the claims of several other creditors, who may have had claims, perhaps much more genuine than the appellant's claim qua the respondent No.2 Company not to mention claims to which the Companies Act affords statutory priorities? - Held that:- The impugned order, whilst declining leave to the appellant to enforce the consent decree dated 9th July 2009 had declared the consent decree dated 9th July 2009 illegal and void, being a fraudulent preference availed by the appellant in the teeth of the provisions of section 531 of the Companies Act. The issue as to whether the appellant had indeed advanced a loan to the Company and whether the appellant was liable to recover such amount with interest has not been foreclosed by the impugned order. The appellant, notwithstanding the impugned order, will always be at liberty to prove its claim before the Liquidator in the winding up proceedings. The impugned order merely prevents the appellant from claiming any fraudulent preference in the matter of recovery of its claims. Therefore, this is not a case where a consent decree has been set aside on the ground of fraud simplicitor. This is only a case where the attempt of the appellant to seek a fraudulent preference has been thwarted. Further, since, by virtue of fraudulent preference, the appellant recovered an amount of ₹ 10,17,03,493/- from the Company (from sale proceeds of Amabattur property), the learned Company Judge has quite correctly ordered the refund of this amount with interest at the rate of 12% per annum, so that such amount can be appropriately dealt with in the course of winding up proceedings by the Official Liquidator. Appeal dismissed.
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Insolvency & Bankruptcy
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2018 (12) TMI 78
Initiating the insolvency resolution process against the respondent-corporate debtor - Default in payment - Held that:- The amount claimed to be defaulted and the date on which the default occurred are also mentioned in column No. 2 of Part IV of the application. In Form -I statement of account of the respondent-corporate debtor for the period of 17. 06. 2015 to 31. 01. 2018 has been attached which has been certified by the Assistant General Manager who is also In-charge of the Computer Systems Bank of the Financial Creditor in order to comply with the requirements of Section 2(A) of the Bankers Books Evidence Act, 1891. This certificate is at page 978 of the paper book. The petitioner has also filed the CIBIL report in order to support the evidence of default and that report is at Annexure A/79. The requirements of Clause (a) of Section 7(3) of the Code have been fulfilled. It is mandatory for the financial creditor to name the Resolution Professional proposed to be appointed as Interim Resolution Professional as required by Clause (b) of Section 7(3) of the Code. The petitioner has proposed the name of Mr. Vikram Kumar, registered Resolution Professional, who has furnished the written communication in Form-II as at Annexure A/81. As perused the written communication and have found the same to be in order. It is certified that there are no disciplinary proceedings pending against the proposed Interim Resolution Professional with the Insolvency and Bankruptcy Board of India or Indian Institute of Insolvency Professionals of ICAI. Presently, he is serving as an Interim Resolution Professional/Resolution Professional in two proceedings. Thus petition is admitted
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2018 (12) TMI 77
Initiation of CIRP by Applicant/Corporate Debtor in respect of itself as being a Corporate Debtor Company - Held that:- As perused the material available on record it shows that the Corporate Applicant has filed a copy of its Board Resolution dated 15.12.2017 by authorising Mr. Girish Kantilal Patel to file the present application on behalf of the Corporate Applicant/Corporate Debtor Company and in the absence of any contrary material, filed in the present case, we do not find any sufficient ground for rejecting the present application because the present applicant is equally having the substantial shareholdings in the Corporate Applicant/Corporate Debtor Company which has stated that it has right for revitalisation and resolution plan under the provisions of Section 10 the IB Code because the Corporate Applicant Company is having its intangible assets in the form of its Goodwill (brand name of the Company) and such goodwill amount to as purchase of brand. Hence, Goodwill expected to be calculated and held as identified asset in the books of account. Hence, Goodwill and Brand may be treated as a valued assets of a company although it may not be in physical form or reflected in the Balance Sheet. By considering the above facts and circumstances of the present case, we find the present application is found complete and deserves for admission under Section 10 of the IB Code.Therefore, the present I.B. Petition is admitted, consequently the moratorium is declared in respect of Corporate Debtor Company under Sections 13 and 14 of the IB Code.
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Service Tax
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2018 (12) TMI 94
Simultaneous imposition of penalty u/s 76 and 78 of FA - period prior to 10/05/2008 - Held that:- The Tribunal has been consistently holding that penalty under Sections 76 & 78 can be imposed simultaneously. Even Kerala High Court in the case of CCE Vs. Krishna Poduval [2005 (10) TMI 279 - KERALA HIGH COURT] has observed that even if the offences are committed in the course of same transaction or arise out of the same act and thus penalties 76 and 78 can be imposed simultaneously. The contention of the department is correct and penalty under Sections 76 & 78 of the Finance Act, 1994 can be imposed simultaneously prior to 10/05/2008 - appeal allowed - decided in favor of Revenue.
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2018 (12) TMI 92
Refund of CENVAT Credit - input services - life insurance service - employee insurance service - rent a cab service - membership club service - Rule 5 of Cenvat Credit Rules 2004 - refund rightly rejected on the ground that the services were covered under the exclusion clause - Held that:- It can be noticed that among supporting documents placed before the adjudicating authority, invoice copies of input services were placed along with cenvat credit account. Invoice cannot establish the relationship between input and output service and the scrutiny made the adjudicating authority in respect of invoices vis-a-vis abstract of cenvat credit cannot be sufficient document for the purpose of establishment of such relationship. Moreover, such scrutiny by the adjudicating authority was made in the absence of the appellant who, given an opportunity, would have been in a position to justify the same, subject to satisfaction of the adjudicating authority. It is a fit case which is required to be re-adjudicated upon with reference to production of relevant documents that would establish the linkage between input and output service and the same would ensure natural justice to the appellant also - appeal allowed by way of remand.
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2018 (12) TMI 87
Demand of Interest and penalty - CENVAT Credit availed but not utilized - Rule 14 of Cenvat Credit Rules - Held that:- Vide an amendment in rule 14 the word ‘or’ used herein has been substituted with word ‘and’. This particular amendment makes it clear that it is only when cenvat credit taken is utlised that the assessee shall be liable to pay the interest. Else no interest liability shall devolve upon the assessee. No doubt, the period in dispute is the period prior to the aforesaid amendment. But law has been settled that any amendment, which is beneficial in nature for the assessee has to be given a retrospective effect. The decision as relied upon by the appellant in the case of Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] makes it clear that even prior the amendment, the opinion formed was that since the assessee has not taken the benefit of the cenvat credit taken except entry in their account books, there was no liability to pay the interest. Demand of interest and penalty set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 86
Extended period of limitation - no malafide intent - revenue neutral situation as whatever service tax was paid by the appellant was entitled for cenvat credit - paymnet of service tax with interest on being pointed out - penalty for the normal period - Held that:- Whatever amount of service tax is to be paid by the appellant under reverse charge mechanism, the appellant entitled to avail cenvat credit. In that circumstances, relying on the decision of this Larger Bench in the case of Jay Yuhshin Ltd. [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI], the extended period of limitation is not invokable. Penalty for the demand within normal period - Held that:- The extended period of limitation is not invokable, consequently, for the demand within the period of limitation penalty is not imposable on the appellant - As extended period of limitation is not invokable, therefore, a show cause notice was not required to be issued to the appellant in terms of Rule 73 (3) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 83
Scope of SCN - Demand under the head Construction of residential complex service and industrial construction service - service were of works contract in nature which finds no place in SCN - Held that:- The services provided by the appellant alongwith transfer of goods and merit of classification of the said service provided by the appellant under the category of “works contract service” as per the decision of the Hon’ble Apex Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] whereas the demand has been confirmed against the appellant under the category of “construction of residential complexes and commercial or industrial construction service”. The merit of classification of service rendered by the appellant is under the category of “works contract service” and no demand under the category of “works contract service” issued against the appellant. Therefore, the impugned order is not sustainable in the eyes of law. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 81
Manpower Supply and Recruitment Agency Service - expenses incurred towards secondment of employees from group companies - period April 2005 to September 2011 - Held that:- The tax liability with regard to the payments made to such employees itself has been settled in favour of the appellant particularly in the case of Computer Sciences Corporation India Private Limited [2014 (11) TMI 125 - ALLAHABAD HIGH COURT], where it was held that There was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Unless the critical requirements of clause (k) of Section 65(105) are fulfilled, the element of taxability would not arise - demand not sustainable. Demand of interest - Held that:- As service tax has been paid at that time, in that circumstances, no interest has been payable by the appellant - demand of interest not sustainable. Business Support Services - Held that:- The group entity has merely arranged certain services for Colt group as a whole, the cost of which is being shared between the group companies. Such sharing of expenses without provision of any services cannot be said to result in provision of a taxable service under Business Support Services - no service tax is payable by the appellant. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 80
Validity of SCN - Principles of res-judicata - Renting Immovable of Property Service or franchise service - scope of SCN - Held that:- Admittedly, in the impugned order, the adjudicating authority has held that service rendered by the appellant does not fall under the category of Franchise Service . Therefore, as the demand of service tax under initial show cause notice has indirectly been dropped by the adjudicating authority, the same demand of service tax issued in another show cause notice to the appellant which is against the principles of res-judicata under section 11 of Code of Civil Procedure, 1908 as on the same amount do not sustain. The show cause notice dt.12.10.2012 is not maintainable and the principle of res judicata is applicable - there is no merit to demand service tax from the appellant under Renting Immovable of Property Service . Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 75
Classification of services - Works contract - Continuing contracts - Held that:- The activities undertaken by the appellant falls within the works contract service and liable to the benefit of Works Contract Act subsequent to 01.06.2007 in view of the decision of the Hon’ble Supreme Court in case of Commr. Of Central Excise & Customs, Kerala vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. Extended period of limitation - Held that:- It is on record that for the previous period department had been issuing the show cause notice which was subject matter of appeal before this Tribunal - the department is precluded from invoking the extended period for raising of the demand in view of the decision in the case of Ramdev Blocks vs. Commissioner of Central Excise [2016 (12) TMI 81 - CESTAT MUMBAI] - the entire demand is time barred. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 74
Penalty u/s 77 and 78 of FA - invocation of Section 73(3) of the Finance Act, 1994 - appellant has paid service tax with interest on beiing pointed out - Held that:- Explanation of Section 73(3) is clarificatory in nature, hence can be made applicable both prospective and retrospective - The amendment vide Explanation to Section 73(3) is retrospective in nature as the said amendment has declared that no penalty shall be imposed in cases where the tax has been paid in full along with interest within before the issuance of the show cause notice. In the case of Tamil Nadu Small Inds. Corporation Limited v. Commissioner of Central Excise Chennai -[2008 (2) TMI 367 - MADRAS HIGH COURT], it was held that where an amendment has been introduced to clarify the intention of a notification, the said amendment shall be retrospective in nature. The appellant’s case deserves waiver of penalty imposed under Section 77 & 78 of the Finance Act, 1994 in view of Section 73(3) of the Finance Act, 1994 - appeal allowed - decided in favor of penalty.
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2018 (12) TMI 73
Refund of Service tax - export of goods - N/N. 41/2012-ST dated 29/06/2012 - it was alleged that appellant-assessee has not supported their claim by any evidence to show that all the services used by them have been used only in relation to export of goods and not for any other purpose - co-relation between the services received and utilized in relation to export of goods - Held that:- The services in respect of the said invoices mentioned at the brief fact above are the taxable specified services in terms of the said notification which have been rendered for the export of the said goods for the relevant period of claim and therefore, fulfilled the conditions/requirements of the said notification and the said amount is admissible for refund. An amount of ₹ 4,48,188/- claimed by the said claimant is admissible for refund of Service Tax paid on Taxable specified services in terms of the said notification - refund allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 72
Goods Transport Agency service - reverse charge mechanism - demand of service tax with interest and penalty - period of dispute is from January, 2005 to February, 2006 - Held that:- During that period there was lot of controversies regarding liability of payment of service tax. The appellants are not disputing that they were required to pay service tax from 01.01.2005 but since the transporters provided the GTA Services had already collected the service tax from them and paid the service tax by challans, there was no occasion for them to pay service tax as demanded - Further, they have also placed evidences regarding payment of service tax amounting to ₹ 1,28,318/- as against total liability of ₹ 2,43,151/-. It would be appropriate to remand the matter to the Adjudicating Authority for the limited purpose of verification of payment of service tax for the balance amount - appeal allowed by way of remand.
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Central Excise
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2018 (12) TMI 102
Admitting the notice for hearing - Held that:- Issue notice to the respondents for 20.02.2019 to show cause as to why the appeal be not admitted to hearing. It is directed that, subject to appellant releasing 50% of the amount due in terms of impugned judgment dated 23rd March, 2018 passed by the Customs, Excise & Service Tax Appellate Tribunal to the respondent entrepreneur on furnishing solvent surety to the satisfaction of the Jurisdictional Commissioner within four weeks of furnishing of such surety, payment of balance shall remain stayed.
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2018 (12) TMI 101
Admitting the notice for hearing - Held that:- Issue notice to show cause as to why the appeal be not admitted to hearing. It is directed that, subject to appellant releasing 50% of the amount due in terms of impugned judgment dated 20th March, 2018 passed by the Customs, Excise & Service Tax Appellate Tribunal to the respondent entrepreneur on furnishing solvent surety to the satisfaction of the Jurisdictional Commissioner within four weeks of furnishing of such surety, payment of balance shall remain stayed.
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2018 (12) TMI 98
Interest on delayed refund - Section 11BB of the Central Excise Act - Held that:- Admittedly, the respondents/revenue have refunded a sum of ₹ 59,374/- only on 07.09.2009, despite the order passed by the Commissioner (Appeals) not to chosen to pay the interest, this Court has also observed that the definition of 'debt' under the Interest Act, covered the present event also - this Court is of the considered view that, the writ petitioner/appellant is entitled to interest on the belated refund. The writ petitioner/appellant is entitled to interest @ 6% per annum under the Interest Act, for the period from 06.08.1985 to 26.08.1995 and under Section 11BB of the Central Excise Act from 26.08.1995 to 07.09.2009 - Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 97
Admission of appeals u/s 35-G of the Central Excise Act - Court could have proceeded to dismiss the appeals for non-prosecution on account of absence of the counsel for the parties - Held that:- On a reading of Order 41 Rule 19 of the Code of Civil Procedure, it is found that re-admission of an appeal in terms of Order 41 Rule 19 CPC is possible only in a case where the dismissal is one in default simpliciter. However, once the appeal is decided on merits, perhaps the proper remedy was either to seek review of the order or challenge the same before the Apex Court. The reason for non appearance has been sufficiently explained - in view of settled law, the applications are allowed and the appeals are directed to be re-admitted for purpose of hearing - application allowed.
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2018 (12) TMI 95
Clandestine removal - surplus stock of angles, channel and joist - appellant was issued show cause notice on 31-12-2012 on the ground that the goods were kept with intent to be cleared without payment of duty - Held that:- The appellate Tribunal has observed that there is nothing on record to support the appellant's argument that such goods were manufactured in trial run and did not meet the necessary specifications. Since the quantity of 994.080 MT was found to be considerable the appellate Tribunal concluded that it stands on a different footing then billet/bloom. Liability to make payment of central excise duty arose the moment excisable goods are manufactured, but the appellant did not make payment of the goods from May, 2012, therefore, the appellate Tribunal has rightly rejected the argument concerning angles, channel & joist. Presence of 994.080 MT of angles, channel & joist having not been disputed, non-acceptance of appellant's explanation does not raise any substantial question of law - appeal dismissed - decided against appellant.
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2018 (12) TMI 91
Misdeclaration of goods - Department observed that the respondent is mis-declaring one of the products that is Natural Gasoline Liquid (NGL) as Naphtha at the time of clearance from their factory premises - benefit of N/N. 18/2009/CE dated 7/7/2009 (as amended) - entire case revolves upon the report of chemical examiner dated 30th August 2011. Whether the product manufactured by the respondent is NGL having excise duty at the rate of 14 per cent ad volerum plus ₹ 15 Rs per liter having tariff entry as 2710 12 20 or it is Naphtha having the excise duty at the rate of 14 per cent ad volerum and tariff entry as 2710 12 90? Held that:- The chemically NGL and Naphtha are two different products having overlapping physical and chemical properties but the key differences as discussed have when seen in relation with the statements on record have established it beyond doubt that the product manufactured by the respondent/assessee is natural gasoline liquid (NGL) which attracts duty at the rate of 14 per cent ad volerum + ₹ 15 per liter and not Naphtha. In the new Tariff NGL is treated separate from motor spirit and continues to have a specific entry i.e. 2710 12 20 but Naphtha finds no mention under the new Tariff. However both have been grouped under light oils and preparations . If at this stage the report of chemical examiner about the sample in question is observed, it specifically mentions the product as a low boiling liquid petroleum product extracted from natural gas. The new tariff defines such a product specifically as NGL. Once this is so, there is no reason to still hold the product as Naphtha. Irrespective that Naphtha is a low boiling liquid petrol product but as is discussed above, it is not directly extractable from natural gas this may be the reason for no specific entry called Naphtha under Chapter 27. The classification of the product in the Central Excise Tariff has to be done as per the rules of Interpretation, Chapter notes and Section notes contained in the Tariff. The definition under the trade parlances and Commercial understanding or definition under any other literature including scientific literature can only be referred if specific definition is not given in the chapter or the section notes. It may be seen that chapter heading 2710 old 6 digit Tariff, which existed in 2005 there was a specific sub heading 2710 14 for Naphtha and 2710 15 for NGL, both were the products grouped under broad heading of motors spirit however in the present 8 dejected Tariff entry of Naphtha has been removed and natural gasoline liquid is grouped under a variety of light oils and preparations (2710 12) and continues to exist being classified under Tariff item 2710 12 20. Supplementary note (b) of Chapter 27 of CETA defines NGL as a low boiling liquid petroleum product extracted from natural gas. NGL has been separated from the group of Motors sprits. Earlier NGL, SBPS and Naphtha all were under the Tariff Group of Motors spirits,( as discussed above). This we take as a ground to hold that legislate intended to seggregate NGL, it being a different product then Naphtha irrespective both being low boiling point liquids. The evidence on record is that the product of respondent has more of C5 with traces of C6 and other higher hydro carbons as nil. Seen from this angle the product in hand is NGL having a specific definition in the Tariff. The question of construing it as Naphtha from the view point of the ordinary or popular sense has no relevance. Time Limitation - Held that:- In the present case the mis-declaration on part of respondent has already been established. Major duty difference on the mis-declared product is also held to be the strategy of tax evasion. Merely that assessee is PSU is not sufficient to set aside the SCN as being barred by time - SCN not barred by time. Thus, Commissioner rather has proceeded with the pre-supposed mind of holding the product of respondent being Naphtha. The findings accordingly are held as apparently wrong hence are hereby set aside - appeal allowed - decided in favor of Revenue.
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2018 (12) TMI 90
Classification of goods - Micro Cellular Rubber Blocks - Whereas the appellants have contended that they are manufacturing Blocks, Revenue’s contention is that the same are Sheets - Held that:- In any case and in any view of the matter even if the goods are held to be sheets, as contended by the Revenue, the same are exempted in terms of Sr. No.39 of Notification No.3/2005-CX dated 24/02/2005 as amended. In terms of the said Serial number sheets of Micro Cellular Rubber used in the manufacture of soles, heels or soles and heels combined for footwear attract nil rate of duty. The appellants have produced on record the affidavit of their customers indicating that the goods stand used by them in the manufacture of soles or heels or both, thus establishing the use of the goods leading to the consequential relief in terms of the Notification. It is seen that Revenue has not produced any contrary evidence to the effect that the goods were not used as soles or heels for footwear. As such, even if the goods manufactured by the appellant are held to be sheets, the same would be exempted in terms of N/N. 3/2005-CX. While considering an identical Notification, Tribunal observed that in the absence of any material on record to suggest that goods cleared by the assessee were not used for making heels and soles for footwear and even if the buyers used the goods for repair of footwear, the violation of condition of Notification cannot be presumed. The demand cannot be upheld against them - appeal allowed in toto.
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2018 (12) TMI 89
CENVAT Credit - input - lubricants /greases used in the dumpers, which are used by the appellant in their Mines for the transport of extracted ores - Violation of Rule 3 of Cenvat Credit Rules, 2004 - recovery of CENVAT Credit alongwith demand of Interest and penalty - Held that:- The only criteria for admissibility of cenvat credit on input are that same must be used in the factory of the manufacturer of the final product. In the present case, there is no dispute that the dumpers in question are being used for transporting the extracted ore in the Mines of the appellant. Ore is an input of the appellant herein and the entire Mines is the place of manufacture. In the given circumstances, disputed goods are used in relation to the manufacture of final product of the appellant and accordingly, very well qualify aforesaid definition of input and thus are eligible for availment of credit. The adjudicating authorities below have passed the orders in sheer ignorance of the amendment in the definition of input. Their order is therefore not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 88
Imposition of penalty u/s 11AC - appellant did not discharge its Central Excise duty liability due to bona fide mistake - Held that:- Payment of service tax has got nothing to do with the issue of nonpayment of Excise duty. Inasmuch as the entire demand was raised on the basis of records maintained by the assessee, the Adjudicating Authority has rightly concurred with the assessee on the ground of absence of any mala fide, in which case he should not have imposed any penalty upon them. The Excise duty payment alongwith interest upheld - penalty set aside - appeal allowed in part.
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2018 (12) TMI 85
Valuation - determination of annual production capacity - rejection of refund claim - whether the Furnace installed in the premise of the appellant is Batch type or Pusher type? - Held that:- Batch type Furnace is always slow in heating because the material is heated batch-wise whereas the Pusher type Furnace is always high capacity furnace wherein the material is heated continuously and keeps on moving. Now from the facts, it is to be ascertained that the Furnace of the appellant is slow type or high speed. The rolling mill of the appellant was held by the Commissioner as slow speed. In that circumstance, in terms of the decision of this Tribunal in the case of Surendra Steel Rolling Mills [2003 (4) TMI 305 - CEGAT, NEW DELHI] it cannot be said that the Furnace installed in the factory premises of the appellant is of Pusher type and the same is held as Batch type, as claimed by the appellant - the appellant is having one furnace of slow speed and having a rolling mill of Batch type and accordingly, their ACP is to be determined. Matter remanded back to the adjudicating authority to determine the Annual Production Capacity and thereafter to calculate the duty payable by the appellant, further, to determine whether the appellant is entitle for refund or not? - appeal allowed by way of remand.
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2018 (12) TMI 84
CENVAT Credit - relevant date for taking credit and payment of service tax - Rule 4(7) of CCR, 2004 - the appellants have taken Cenvat credit of service tax on input service before making payment of the same - contravention of Rule 4(7) of CCR, 2004 - Held that:- The assessee is entitled to avail the Cenvat credit on input service, if the bill/invoice of the said input service has been paid - the appellant is entitled to avail Cenvat credit on payment of bill/invoice of input service along with service tax and the payment of same has not been disputed by the Revenue - no demand of service tax is sustainable against the appellant. Demand of Interest - Held that:- It is the mandate of provisions of Cenvat Credit Rules, 2004, the appellant is entitled to avail Cenvat credit after making payment of the invoice - thus, for the intervening period, the appellant is liable to pay interest. Penalty - Held that:- As the appellant had contravened the provision of Rule 4(7) of the Cenvat Credit Rules, 2004, in these circumstances, the appellant is liable to pay penalty of ₹ 2000/- in each case. Appeal allowed in part.
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2018 (12) TMI 82
Benefit of area based exemption - denied on the ground that the appellant has not exercised option to avail benefit in writing before availing the exemption under N/N. 50/2003-CE dated 10.06.2003 - Held that:- The appellant has intimated the Range Superintendent, Parwanoo, Himachal Pradesh for availing the benefit of exemption under N/N. 50/2003-CE dated 10.06.2003. On 29.03.2005 through registered post and as per the reply to the RTI filed by the appellant, it has been stated that during the period 15.02.2005 to 10.01.2006, the records of inward DAK were not maintained in the office of the Deputy Commissioner, Central Excise Division, Shimla. As the appellant has been able to produce the intimation sent to the department for availing benefit of exemption notification vide letter dated 29.03.2005 - Benefit of exemption notification cannot be denied to the appellant as no other fault has been found against the appellant to deny benefit of exemption Notification by the adjudicating authority. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 79
CENVAT Credit - duty paying invoices - it has been alleged that that the manufacturer-buyers had availed inadmissible Cenvat credit on the basis of invoices issued by the dealers who got invoices from M/s. Triveni Castings Pvt.Ltd. without physical movement of steel ingots - Held that:- Without contrary evidence placed by the Revenue, credit cannot be denied to the manufacturer-buyers. Moreover, during the course of investigation, no inclupatory statements of the appellants have been recorded by the Revenue. Moreover, M/s. Triveni Castings Pvt. Ltd. has stated that they have manufactured steel ingots and the supplied the same to the manufacturer-buyers through the dealers. Without proper investigation, it cannot be alleged that the appellants have not received duty paid steel ingots manufactured by M/s. Triveni Castings Pvt. Ltd. - the appellants i.e. Manufacturer-buyers have correctly availed Cenvat credit on steel ingots manufactured by M/s. Triveni Castings Pvt.Ltd. Penalty - Held that:- As the manufacturer-buyer has received the goods through proper channel, no penalty can be imposed on the dealers as well as manufacturer-buyers. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 71
CENVAT Credit - input services - GTA Service - Service Tax paid on outward freight on goods cleared from factory to the customer’s premises i.e. beyond the place of removal - Rule 2(l) of the CENVAT Credit Rules, 2004 - Held that:- The issue is now well covered by the decision of Hon’ble Supreme Court in the case of CCE Belgaum Vs. Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT], where it was held that from 01.04.2008, with the amendment, the CENVAT credit is available only upto the place of removal whereas as per the amended Rule from the place of removal which has to be upto either the place of depot or the place of customer, as the case may be - credit allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (12) TMI 100
Penalty u/s 34(8) of the U.P. Vat Act, 2008 - assessee had, of its own and prior to issuance of any notice, cleared the default in payment of T.D.S. amount together with interest - Held that:- Though the language of section 34(8) of the Act does not admit any element of concealment as an ingredient for the penalty imposable under that provision of law, at the same time it clearly does not appear to suggest that in every case of default, in either making a deduction or in timely depositing the T.D.S. amount, the defaulting assessee must, as a matter of principle, be penalised - The word 'shall' used to provide for the effect or consequence of the penalty order cannot be read out of context to imply that the assessing officer must necessarily, in all cases of default, irrespective of all other attending facts and circumstances obliged to impose penalty. To accept such an interpretation, besides doing violence to the plain language of the sub-section would otherwise discourage a bona fide assessee from rectifying his own default, especially in cases where the revenue may not be even aware of the default or its cure on self-act of the assessee as in the instant case. On the question of interpretation, the imposition of penalty under section 34(8) of the Act as also quantification of the penalty amount (where that penalty may be found imposable), is found to be directory and not mandatory. Only the enforcement of the penalty order is found to be mandatory. In the present case, undisputedly the assessee rectified the default committed by it (during A.Y. 2010-11) together with interest before the end of the calendar year 2011 i.e. during A.Y. 2011-12. The revenue on the other hand did not realize the existence of that default or its rectification made by the assessee, till as late as 09.09.2014. This undisputed fact mitigates against the levy of penalty as the assessee was not caught having committed the default and it had made good the loss to the revenue before issuance of any notice of demand with respect to the defaulted amount etc. - There survived no further legal justification to penalize such an assessee. Revision allowed - decided in favor of the assessee and against the revenue.
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