Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 12, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition on NRI Mobilization expenses - the credit of a banking business is very sensitive. It largely thrives upon the confidence which its constituents have in its management. To maintain such confidence, the management had to make concessions to preserve the goodwill and relations with its clients. Under such circumstances, the expenditure was allowed
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Deemed dividend u/s 2(22)(e) - payments ‘made to any concern in which the shareholder is a member’ - common shareholder having a substantial interest in the assessee company as well as in the creditor companies - Revenue failed to prove that the case is falling under the second limb of section 2(22)(e).
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Having accepted that the expenditure claimed was bogus, the ITAT, for strange and unexplained reasons, applied the GP Ratio which was entirely unwarranted and thus, reduced the tax liability of the assessee drastically. - order of ITAT reversed.
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Reopening of assessment u/s 147 - non-filing of return (ITR) - reason to believe - even if assessee failed to file the ITR, the primary requirement of the Assessing Officer having a reason to believe that the income chargeable to tax had escaped assessment would apply.
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Avoidance of tax by certain transactions in securities - Scope of section 94 - The loss claimed by the assessee on the sale of securities shall be allowed without any dis-allowance made under sub-section (4) of Section 94.
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Validity of assessment proceedings u/s 153-C - the satisfaction note is incomplete in as much as the satisfaction of the Assessing Officer as required u/s 153-C - On this ground alone, the proceedings initiated by the revenue cannot be sustained.
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Once a notice u/s 148 is issued, the proper course of action for the noticee is to file a return and to seek reasons for issuing notice, if he so desires. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.
Customs
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A confiscation and penalty order was passed solely on the retracted statement of the appellant - and further these persons were not examined in the adjudication proceedings - the order is contrary to settled legal position and was clearly illegal, arbitrary and liable to be set-aside.
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Release of goods after being provisionally assessed - The burden lies entirely on the authorities. When they entertain a doubt regarding the genuineness of the documents submitted by the assessee, it is for them to get it cleared as expeditiously as possible.
DGFT
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Online Module for Filing & Tracking Quality Complaints/Trade Disputes relating to International Trade
Service Tax
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Valuation - inclusion of reimbursable expenses received from the principals in the assessable value - The levy of Service Tax on expenses cannot be sustained.
Central Excise
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Benefit of exemption - fly ash - actual user condition - This is a matter of doubt and the benefit of doubt must go in favour of the Revenue and against the assessee.
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CENVAT Credit - clearance/ sale of Capital goods after use - The reversal of CENVAT credit on the depreciated value of the capital goods which were used for some time by the respondent herein is correct.
VAT
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Imposition of penalty - delay in deposit of TDS - The Railways should have been conscious of its statutory obligations - penalty reduced to 05% of TDS amount.
Case Laws:
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GST
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2019 (2) TMI 462
Vires of Section 174 of the KSGST Act - power of State to graft the section - demand barred by time limitation u/s 25(1) of the KVAT Act - Held that:- The issue is squarely covered by the decision in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that the State do not lack the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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2019 (2) TMI 461
Filing of Form GST Tran-1 - It is the grievance of the petitioners that, the respondent No.6 has issued the endorsement advising the petitioners to contact the respective individual officers for redressal of their grievance - Held that:- In view of the insertion of Rule 1 (1)(A) to Rule 117 of the Central Goods and Service Tax Rules, 2017, which provides that the Commissioner on the recommendations of the counsel, can extend the date for submitting the Form in GST Tran-1 by a further period not beyond March 2019 in respect of registered persons, who could not submit the said declaration on the common portal and the notification issued by the Commissioner dated 17th September 2018 extending the period for submitting the Form GST Tran-1 till 31.01.2019 for the class of registered persons, who could not submit the Form / declaration by the due date on account of the technical defect on the common portal - the writ petition does not survive for consideration and is rendered infructuous. Petition dismissed as infructuous.
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2019 (2) TMI 460
Vires of Section 174 of the KSGST Act - power of State to graft the section - demand barred by time limitation u/s 25(1) of the KVAT Act - Held that:- The issue is squarely covered by the decision in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that the State do not lack the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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Income Tax
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2019 (2) TMI 466
Addition on NRI Mobilization expenses - whether said amount was expended towards administrative and other related expenses and the entire expenditure was for the purposes of head office and, therefore, no restrictions in terms of Section 44C? - Held that:- Assessee supported the view of the Tribunal and contended that in an identical situation for the earlier assessment years, the Revenue had not carried the matters in appeal before the High Court. We note that non-filing of the appeals by the Revenue could not have been on the ground of low tax effect. Under the circumstances, the decisions of the Revenue not to challenge the Tribunal's judgment in earlier years in respect of this very assessee, can be seemed as conscious decision of accepting the proposition involved. This question is, therefore, not entertained. Addition on account of replacement of shares by the assessee - whether such loss had to be allowed as business expenditure? - Held that:- The assessee was not under the legal obligation to make the payment in absence of any specific contract or a Court order to maintain its reputation in the market and cordial business relations with the customers. The Supreme Court in case of Nainital Bank [1966 (9) TMI 46 - SUPREME COURT] in similar circumstances, had held that such a claim was allowable under Section 10(2)(xv) of the Indian Income Tax Act,1922. In such case, large quantity of jewellery pledged with the respondent assessee bank by its constituents and currency notes were stolen by dacoits from the premises of the bank. In regard to the loss of jewellery, the bank settled the claim and claimed a loss as a business loss expenditure. The Supreme Court held that sole question to be judged is whether the bank in incurring the expenditure acted in the interest of and for the purpose of its business. It is also agreed that the credit of a banking business is very sensitive. It largely thrives upon the confidence which its constituents have in its management. To maintain such confidence, the management had to make concessions to preserve the goodwill and relations with its clients. Under such circumstances, the expenditure was allowed. No question of law is, therefore, arises.
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2019 (2) TMI 459
Deemed dividend u/s 2(22)(e) - payments ‘made to any concern in which the shareholder is a member’ - common shareholder having a substantial interest in the assessee company as well as in the creditor companies - excess of Reserve and Surplus over loan - Held that:- admittedly the assessee company is not a beneficial owner of any shares in the creditor companies which have advanced the loans. - For the second limb of Section 2(22)(e) of the I.T. Act, 1961 to come into play, the condition that has to be fulfilled is that the creditor companies ought to have given monies by way of an advance or loan to a concern in which the assessee company is a member or partner and in which it has a substantial interest. In other words, what the second limb of section 2(22)(e) contemplates is that, the creditor companies give a loan not directly to its shareholder but to any concern in which such shareholder has a substantial interest. It is then that the same would attract the second limb of Section 2(22)(e) of the I.T. Act, 1961. That is certainly not the factual situation before us. Decided against the revenue.
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2019 (2) TMI 458
Estimation of income - ITAT applied the GP ration on additions made u/s 68 - Genuineness of purchase - bogus transaction or not - assessee claimed that the readymade garments were exported and claimed drawback amounts from the concerned authorities. After enquiry, the AO was of the opinion that the amounts claimed towards purchase of the raw materials were bogus - Held that:- the application of law by the lower revenue authorities [AO and the CIT(A)] was correct. Having accepted that the expenditure claimed was bogus, the ITAT, for strange and unexplained reasons, applied the GP Ratio which was entirely unwarranted and thus, reduced the tax liability of the assessee drastically. Decided in favor of revenue.
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2019 (2) TMI 457
Revision u/s 263 - amount received by the partner after retirement from the partnership firms - assessee declared total income at 'Nil' - CIT observed that not taxing the partner on the retirement compensation, is erroneous and prejudicial to the interest of the Revenue - Held that:- Assessing Officer had made necessary enquiries with regard to the amounts received by the Respondent on its retirement in the context of taxability on account of capital gains of the amounts received on retirement by the Respondent. Thus, the contention of the Revenue that, no enquiry was done by the Assessing Officer with regard to the compensation received, stands negatived by the office note annexed to the Assessment Order dated 26th December, 2011. In any event, the issue on merits in our view, is covered by the decision of this Court in Prashant S. Joshi [2010 (2) TMI 271 - BOMBAY HIGH COURT], even though the order was in the context of reopening notices. It was in the above context, the Court examined the scope of Section 45(4) of the Act to hold that in terms thereof, on dissolution of the firm or otherwise, the capital gains arising from transfer of a capital asset, would be chargeable to tax as income of the firm. Revision order u/s 263 is not valid - Decided against the revenue.
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2019 (2) TMI 456
Reopening of assessment u/s 147 - non-filing of return (ITR) - reason to believe - Held that:- Assessing Officer has proceeded on wrong premise that even when called upon to state why the petitioner had not filed return of income, he had not responded to the said query. The petitioner did communicate to the Department that he had no taxable income and therefore, there was no requirement to file the return. The Assessing Officer did not carry out any further inquiry before issuing the impugned notice. In the reasons, one more error pointed out by the petitioner is that the Assessing Officer referred to the sum of ₹ 18.82 crore as total transaction in the commodities. In the petition as well as in the objections raised before the Assessing Officer, the petitioner pointed out that his sales were to the tune of ₹ 16.82 crore against purchases of 16.84 crore and thereby, he had actually suffered a loss. The Assessing Officer has not discarded these assertions. We are conscious that the petitioner not having filed return of income and consequently there being no scrutiny assessment, the Assessing Officer would have much wider latitude to reopen the assessment. However, in such a case also, the primary requirement of the Assessing Officer having a reason to believe that the income chargeable to tax had escaped assessment would apply. Decided against the revenue.
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2019 (2) TMI 455
Reopening of assessment u/s 147 / 148 - Additions u/s 40(a)(i) for non deduction of TDS - booking of expenditure initially on estimated basis, which was revised on finalization - disclosure of information - Held that:- Revenue argued that the information with respect to disallowance or non disallowance of the expenditure would appear only in the earlier assessment orders. - Even if this is so, surely, the petitioner cannot be blamed for non disclosure. - Notice for reopening of assessment quashed.
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2019 (2) TMI 454
Avoidance of tax by certain transactions in securities - Scope of section 94 - interest income - Claim of exemption u/s 10(15) - loss on sale and re-purchase of units of the Unit Trust of India - assessee being not an owner of the shares - assessee did not have a business wholly or partly in securities. Held that:- Sub-sections (1) and (4) of Section 94 are interlinked. We are of the opinion that the enquiry should commence from sub-section (1); where the owner of securities attempts to sell and repurchase, so that the interest income is not taxed in his hands. In that circumstances, the person to whom the securities are sold and then repurchased from; who actually earns the interest income and is liable to income-tax, but however is absolved from it by reason only of sub-section (1); would not in his assessment be entitled to claim for any loss that occurred in the transaction. Section 94 at one stroke discourages both the owner of securities, who sells and the purchaser from entering into a transaction, ostensibly to be one for avoidance of tax on the interest income. Pertinently, it is to be seen that sub-section (4) does not speak of an exemption under Section 10(15), but speaks of the interest income received by the person, who buys and re-sells the securities, not having the liability to income tax by reason only of sub-section (1), the deeming provision, which mulcts the liability of income tax on such interest income, on the owner of the securities, who sold it and then repurchased it. The loss claimed by the assessee on the sale of securities shall be allowed without any dis-allowance made under sub-section (4) of Section 94. Decided in favor of assessee and against the revenue.
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2019 (2) TMI 453
Validity of assessment proceedings u/s 153-C - Jurisdiction - unearth of undisclosed income during search and seizure proceedings - Recording of satisfaction by the AO before initiating proceedings - Held that:- Merely stating that the case is covered under Section 153-C of the Act and the case has been notified under Section 153 of the Act would not be suffice and the same cannot be construed as the satisfaction recorded under Section 153-C of the Act. On the other hand, the said note would disclose that it is only a note prepared for initiating proceedings under Section 153-C of the Act. The same, neither has any heading/title, to indicate it as a satisfaction recorded nor the contents suggests the satisfaction of the Assessing Officer. Hence, the said note is incomplete in as much as the satisfaction of the Assessing Officer as required under Section 153-C of the Act. On this ground alone, the proceedings initiated by the revenue cannot be sustained. The aforesaid aspect goes to the root of the matter. Further proceedings initiated under Section 153-C of the Act are without jurisdiction and can be held to be vitiated in law. In such circumstances, there is no bar for the writ Court to entertain the writ petition dehors the alternative remedy of appeal available under the Act. Proceedings quashed - Decided in favor of assessee.
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2019 (2) TMI 452
Reopening of assessment u/s 147 - notice issued u/s 148 beyond 4 years - failure to record the reasons for reopening - sanction obtained u/s 151(2) and not u/s 151(1) - Held that:- once a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file a return and to seek reasons for issuing notice, if he so desires. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. - Decision in the case of GKN DRIVESHAFTS (INDIA) LTD. [2002 (11) TMI 7 - SUPREME COURT] followed. Since a Bench of this Court, while entertaining this writ petition, by an ad interim order dated 16.11.2016 had clarified that no final order shall be passed by the Assessing Officer without leave of this Court, it is directed that the aforesaid order shall remain in force for a further period of three weeks after decision by the Assessing Officer on the objections preferred by the petitioner so as to enable him to approach the appropriate forum in accordance with law, if occasion so arises.
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Customs
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2019 (2) TMI 465
Confiscation - penalty - illegal import of Gold - appellant has not been able to discharge burden of proof as enshrined under Section 123 of the Act, 1962. Held that:- In the present case entire prosecution is based on the confessional statement given by Shakil Ahmad Khan before the Customs Officers under Section 108 of the Customs Act 1962. Shakil Ahmad Khan subsequently retracted his statement and denied his involvement in movement and/or smuggling of said gold. He further stated that on 27.11.2013 he was going to Lucknow for the treatment of his wife Mrs. Tajni Begum. At Ramnagar Railway Crossing, the Customs Officers checked the bus and asked every passenger about a black packet. The officers asked about his profession, when he told that he is a gold artisan, the Officer dragged him, alleging that the gold belongs to him - there is no other material for imposition of the penalty apart from confessional statement of Shakil Ahmad Khan. In the present case the order passed under Section 111 and 112 of the Customs Act by the Commissioner Customs (P), Lucknow on 05.08.2014 and the said order records the entire proceedings conducted during the investigation. A perusal of the aforesaid order would indicate that no efforts were made by the appellants to prove that the confessional statements were made voluntarily. No Customs Officer or any independent witness was examined by the said authority which could prove that the said confessional statement was taken voluntarily and could be used as a substantial piece of evidence against the respondents. A confessional statement of a co-accused cannot by itself be taken as a substantive piece of evidence against another co-accused and can at best be used or utilized in order to lend assurance to the Court. In the absence of any substantive evidence it would be inappropriate to base the conviction of the appellant purely on the statements of co-accused - In the present case the CESTAT has rightly concluded that a confiscation and penalty order was passed solely on the retracted statement of the appellant Mr. Shakil Ahmad Khan and father of the appellant Mr. Mridul Agarwal and further these persons were not examined in the adjudication proceedings and therefore, the confiscation, penalty order has been passed only on the basis of such confessional statement is contrary to settled legal position and was clearly illegal, arbitrary and liable to be set-aside. No substantial question of law raises in these appeals - appeal dismissed.
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2019 (2) TMI 464
Release of goods after being provisionally assessed - exemption from levy of customs duty as per the provisions of the Indo-Sri Lanka Free Trade Agreement (ISFTA) - seeking clearance of cargo - Held that:- A careful reading of the entire instructions would clearly indicate that the Customs Authorities are not to insist on verification in each and every case. The grounds provided for verification have been clearly laid down in Paragraph No.2 of the instruction No.31 of 2016-Customs dated 12.09.2016. Apart from undertaking verification on random basis, only in cases of doubt regarding genuineness of the documents received, the respondents may resort to a verification exercise. In this case, neither in the counter affidavit nor in the typed set of papers, the respondents have indicated if they entertained any doubt in the first instance regarding the genuineness of the certificates of origin submitted by the writ petitioner. The imported goods are agricultural commodities. They are perishable and vulnerable to speedy decay. In such cases, the authorities must expedite the clearance and if they propose to conduct a verification exercise, it must be fast tracked. The burden lies entirely on the authorities. When they entertain a doubt regarding the genuineness of the documents submitted by the assessee, it is for them to get it cleared as expeditiously as possible. The respondents are directed to conclude all the formalities and release the goods forthwith - petition allowed - decided in favor of petitioner.
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2019 (2) TMI 463
Condonation of delay of 452 days in filing appeal - Jurisdiction - power of Committee of Chief Commissioner to review order - Section 129 D (1) of the Customs Act, 1962 - Held that:- The power to review the Order in Original passed by the Commissioner/ Principal Commissioner has been vested to the Committee of Chief Commissioner as per Section 129 D (1) of the Customs Act, 1962 and appeal in the case where the order is reviewed needs to filed within one months from the date of receipt of order of review the by Commissioners. Tribunal has been given power to allow filing of appeal beyond the period as prescribed, provided that appellant is able to show that there was sufficient cause for not being able to file the appeal within prescribed period. Thus as per the above provisions, statutorily prescribed period is of one month for filing the appeal from the dated of receipt of order of review made under Section 129D(1) by the Committee of Chief Commissioner. Thus the appeal was to be filed by 22.07.2017. Since the appeal was actually presented on 18th October 2018, there is delay of 452 days in filing the appeal. The only reason that has been stated by the Appellant in their application is that the delay has occurred on account of the on account of heavy workload in the section dealing with the matter and the transfer of the officers from the section. No other ground has been mentioned for seeking such condonation of delay - this delay in undertaking the statutory obligation caused on the officer authorized by the Committee of Chief Commissioners to file the appeal within period of one month cannot be explained on the ground of heavy workload and transfers of concerned persons. If such a ground is pleaded and admitted, then prescription of statutory time limit for filing the appeal within one month from the date of receipt of order from Committee of Chief Commissioners will lose its relevance. The substantial cause to be shown for delay in presenting the appeal cannot be the work load on the section. Even transfers cannot be reason as the period of delay is nearly 452 days. In the present case, no sufficient cause has been shown for delay in presenting the appeal in present case, as is required to be shown in terms of Section 129D(4) read with Section 129A(5) of the Custom Act, 1962 - In absence of any such justification, there is no merits in the application for condonation of delay - thus, no prejudice is going to be caused to revenue in the matter by dismissing the application for condonation of delay. The Applications for condonation of delay filed by revenue are thus dismissed.
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2019 (2) TMI 451
Maintainability of petition - the authority who issued the said notice is not lacking any jurisdiction or competency - Held that:- The petitioner has already filed the reply to the notice on 18.06.2018. If a reply was already filed by the petitioner to the impugned show cause notice, they have to wait for the adjudication to complete. Without doing so, filing the present writ petition challenging the very notice itself, cannot be entertained. Factual contentions raised touching upon the merits of the allegation made in the show cause notice cannot be gone into by this Court, at this stage - the petitioner is directed to canvass all the contentions before the Adjudicating Authority during adjudicating proceedings - petition disposed off.
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2019 (2) TMI 450
Monetary limit of amount involved in the appeal - the tax effect involved in the present appeal is ₹ 12,00,000/- - Held that:- The Apex Court in Commissioner of Income tax Vs. Dhanalekshmi Bank Ltd., [2015 (8) TMI 474 - SUPREME COURT], where the tax effect was low, had dismissed the appeal without going into the merits of the appeal leaving the question of law open - appeal dismissed.
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2019 (2) TMI 449
Jurisdiction - power of Inspector SIIB to pass seizure order - Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - confiscation - Held that:- Issue notice to respondent no. 2 - List after one month for admission/final disposal.
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2019 (2) TMI 448
Export of prohibited item - export of non-basmati rice in excess of 20% - N/N. 67 dated 23.1.2003 issued under rule 11 of the Export (Quality Control and Inspection) Act, 1963 - Held that:- Appeal admitted on substantial questions of law.
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2019 (2) TMI 447
Rectification of mistake - typographical errors in the final order - Held that:- The applicant was correct in pointing out that there are some typographical errors in the final order, which is accordingly rectified - ROM application allowed.
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2019 (2) TMI 446
Refund of SAD - N/N. 102/2007-cus dated 14.09.2007 - rejection on the ground there is mismatch in their invoice produced along with appeals in respect of bills of entries at the time of clearance of goods vis-a-vis those issued at the time of sale of the good by the importer - Held that:- The appellant failed to produce the triplicate copies of bill of entry, the sales invoice indicating that the VAT has been paid at the time of sale of the goods and the same is required to be made by the appellant while claiming the refund - appeal allowed by way of remand to the Original Adjudicating Authority to verify the identity of goods as per serial number.
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2019 (2) TMI 445
Quantum of Redemption fine and penalty - Valuation of imported goods - used computers - enhancement in assessable value - Held that:- The appellants have imported used computers without license which would make them liable for confiscation as per the provisions of Section 125 of the Customs Act 1962 and the redemption fine needs to be imposed - the appellant is required to pay redemption fine on the bills of entries in these appeals to the tune of 10% of the assessable value - appeal allowed in part.
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Service Tax
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2019 (2) TMI 444
Rectification of Mistake - typographical error in Final Order - Held that:- There is a typographical error in the final order and the same is rectified - ROM Application allowed.
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2019 (2) TMI 443
Rectification of Mistake - error apparent on the face of record or not - it is claimed that the errors are not considered in proper perspective - Held that:- In the final order, Tribunal clearly indicates that it has given full opportunity to make the arguments before the Bench and came to this conclusion - there is no error apparent on the face of the said final order - ROM Application dismissed.
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2019 (2) TMI 442
Maintainability of appeal - non-compliance with the pre-deposit - section 35F of Central Excise Act, 1944 - time limitation of filing appeal - section 35(1) of Central Excise Act, 1944 - Held that:- Filing an appeal, indicating the limitation therein, is provided for in section 35(1) of Central Excise Act, 1944. Beyond that threshold, the sufficiency of an appeal will determine its maintainability for being entertained. Hence, the appeal, having been filed on 14th November 2014, is within the condonable period. The change in law mandating pre-deposit come into place on 6th August, 2014 and, with that change, orders should have included that information in the preamble to enable appellant to comply. This is absent in the impugned order and it was only by communication dated 9th December 2014 that the appellant was made aware of the deficiency which was made good by them - Upon the matter being taken up for disposal on 30th December, 2014, the requirement of predeposit had been complied with and the first appellate authority, even in the absence of the appellant, should have disposed off the matter on merit. Matter remanded back to the first appellate authority for a proper disposal - appeal allowed by way of remand.
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2019 (2) TMI 441
CENVAT Credit - inputs/capital goods - steel plates - FRP corrugated sheets - tongue rail - fasgteners - rail sleepers - MS bolts with nuts etc. - Held that:- There is no dispute as to the fact that the CENVAT credit was availed on various items which were used for laying a railway track within the port premises of the appellant. It is also undisputed that appellant is discharging appropriate service tax liability on the port services rendered by them. It is to be seen that the definition of inputs under Rule 2(k) of the CENVAT Credit Rules specifically states that credit is allowed on all goods used for providing any output services - Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 440
Valuation - repair and maintenance service of computers - inclusion of value of material (spare parts) used in provision of service in the assessable value - benefit of N/N. 12/2003-ST dated 20.6.2003 - Held that:- The learned Commissioner even though held that in principle the appellants are eligible to the benefit of Notification, but rejected the same observing that they could not adduce evidence in this regard. Now, the appellant claims that they are in possession of necessary bills and invoices to establish that spare parts were sold to the customers and suffered VAT/ Sales Tax. In the interest of justice, therefore, the matter is remanded to the adjudicating authority so as to provide an opportunity to the appellant to adduce evidence in this regard - appeal allowed by way of remand.
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2019 (2) TMI 439
Valuation - inclusion of reimbursable expenses received from the principals in the assessable value - Clearing and Forwarding Agent service Held that:- Hon’ble Supreme Court in their recent decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India [2018 (3) TMI 357 - SUPREME COURT OF INDIA] has upheld the decision of the Hon’ble Delhi High Court which struck down as ultra vires Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006. This rule provides for treating any expenditure/costs incurred by service provider in the course of providing the taxable service, to be treated as consideration. The levy of Service Tax on expenses cannot be sustained - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (2) TMI 438
Benefit of exemption - fly ash - actual user condition - Scope of N/N. 06/2002-CE dated 01.03.2002 and N/N. 05/2006 dated 01.03.2006 - Whether the fly ash used in the manufacture of Flex-O-Board (by the sister unit of the appellant) should also be reckoned or only the fly ash used in the manufacture of Aerocon panels should be considered for determining the eligibility of exemption? Held that:- a plain reading of the exemption notification shows that of the various materials used in the manufacture of final products 25% must be fly ash. It does not indicate this 25% will also include any fly ash that might have been used in the course of manufacture of the inputs by the suppliers of the assessee. It also does not indicate, on the other hand, that the fly ash must be used in the manufacture of final products itself. Therefore, two views are possible in interpreting this notification The Department took the first view and the assessee argues the second. This is a matter of doubt and the benefit of doubt must go in favour of the Revenue and against the assessee in view of the law laid down by the constitutional bench by the Hon ble Apex Court. [2018 (7) TMI 1826 - SUPREME COURT OF INDIA] - Hence on merits, we find that the assessee is not entitled to the notification. Time Limitation - Held that:- The assessee have not failed in his duties in maintaining the records as required. The trade notice issued by the Commissioner does not mandate the assessee maintain batch wise records. They also produced the details of the records maintained by them - the extended period of limitation cannot be invoked. The demand of duty and interest within the normal period is confirmed and the demand for the extended period is set aside - the penalty imposed under Section 11AC is set aside - appeal allowed in part.
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2019 (2) TMI 437
CENVAT Credit - trading of goods - exempt activity - non-maintenance of separate records for dutiable as well as exempt goods - Rule 6(3) of CCR, 2004 - Held that:- A pure sale, unassociated with delivery of goods and services together, is not to be considered as service. Therefore what is contained in Section 66D of the Finance Act, 1994 dealing with negative list of services concerning trading of goods as well as inclusion of the same in the explanation appended to clause 2(e) of the Cenvat Credit Rules 2004 are mere clarificatory in nature, as definition of service as contained in 65B(44) and exempted service in 66D are to be read conjointly and not in exclusion of each other. This being the statutory definition, sale of goods; be it made in the high sea or within the territorial boundary of India in which Finance Act, 1994 has its force, cannot be called a service to impose tax liability or deny the credit under Rule 6 of Cenvat Credit Rules. Extended period of limitation - penalty - Held that:- The respondent has not brought-forth any cogent evidence on record to establish the charge of wilful suppression by the appellant company. The order imposing penalty and invoking extended period for issuing SCN is held to have no legal basis. Appeal allowed in part.
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2019 (2) TMI 436
Rectification of Mistake - error apparent in the face of record - Held that:- There was indeed an error. Accordingly, the title in the impugned order is rectified - ROM Application allowed.
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2019 (2) TMI 435
Rectification of Mistake - apparent error in the record - Held that:- It is seen from the order of the Tribunal that in Paragraph No. 6, the Bench had recorded the arguments of the appellant and denied the benefit of CENVAT credit on works contact services but in Paragraph No. 7 allowed the CENVAT credit on works contract services - there is a mistake apparent on the face of the record. The mistake as indicated is corrected - ROM Application disposed off.
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2019 (2) TMI 434
Rectification of Mistake - apparent error in the record - Held that:- There is no error apparent on record calling for rectification of mistake - ROM Application dismissed.
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2019 (2) TMI 433
CENVAT Credit - clearance/ sale of Capital goods after use - Rule 3(4) of CENVAT Credit Rules, 2002 - interpretation of statute - scope of the expression ‘as such’ - Held that:- The Hon’ble High Court of Madras in the case of CCE, Coimbatore Vs. Lakshmi Machine Works Ltd., [2015 (3) TMI 694 - MADRAS HIGH COURT] held that the assessee was required to reverse the credit equal to credit originally availed only if the capital goods were removed ‘as such’ which meant without putting the machinery to any use. The reversal of CENVAT credit on the depreciated value of the capital goods which were used for some time by the respondent herein is correct - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2019 (2) TMI 432
Input tax credit - applicability of provisions of Section 8 of U.P. Value Added Tax Act - Held that:- In the first place, to invoke the provision of Rule 21 (3) of the Rules, normally, the enquiry required to be conducted is only viz-a-viz the seller who may have sold the goods to the assessee claiming ITC against a tax invoice. Once such transaction is found to be genuine and goods established to have been sold, no further enquiry may be required to be made. To that extent the submission of learned counsel appearing for the assessee is correct. However in the facts of the present case, it does appear that other than relying on the enquiry made with respect to the first selling dealer, the revenue authorities also referred to certain other enquiries made from the seller from whom the assessee made the purchases - though normally the Court may have remanded the matter to the assessing authority to pass a fresh order in accordance with law after allowing the assessee an opportunity to rebut the evidence relied upon by the revenue, however, in view of the fact that the present proceedings have arisen from the provisional assessment proceedings and it has been stated at the bar that the final assessment proceedings have not yet been concluded, the present revisions are disposed of with a direction that it shall remain open to the assessing authority to confront the assessee with all adverse material that may have been collected by the revenue authorities with respect to ITC claimed by the assessee, in those proceedings and to accordingly pass an assessment order in accordance with law. Petition disposed off.
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2019 (2) TMI 431
Rectification/revision application - Forms C and F - It was submitted that rectification application filed by the petitioner before the Assessing Officer has not been considered - Held that:- It is not in dispute that the petitioner has uploaded the statutory Forms C and F on electronic portal on 01.01.2019. It is also not in dispute that the physical Forms submitted before the Assessing Authority along with the reply to the proposition notice were not accepted. It is apparent that, at the time of passing the reassessment order on 29.12.2018 the statutory Forms C and F were not available while determining the taxable turnover. This determination of the taxable turnover vis-a-vis the statutory Forms submitted by the assessee on electronic portal on 01.01.2019 goes to the root of the matter. It is apparent that the Assessee indeed possessed the statutory Forms C and F, the genuineness of the same, if ascertained or verified by the Assessing Officer and found to be true and correct, the assessee is entitled to concession in the rate of tax/deduction in the rate of tax/benefit of branch transfer. Hence, it is incumbent upon the Assessing Authority to consider the rectification application filed by the petitioner at Annexures M and P and take a decision in the matter - this Court deems it appropriate to direct respondent No.2 to consider the rectification application filed under Section 69(1) of the KVAT Act at Annexures M and P to the writ petition and take a decision in the matter in accordance with law after hearing the petitioner rather than acceding to the request of transferring the file to the Assessing Officer at Mysuru. Petition allowed by way of remand.
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2019 (2) TMI 430
Reopening of completed assessment - change of opinion - section 29(7) of the U.P. Value Added Tax Act, 2008 - Held that:- The Hon'ble Supreme Court in the case of State of Uttar Pradesh and others vs. Aryaverth Chawal Udyog and others [2014 (11) TMI 1095 - SUPREME COURT] has held that mere change of opinion while perusing the same material cannot be a "reason to believe" that a case of escaped assessment exists requiring assessment proceedings to be reopened. On perusal of record it reveals that reassessment proceedings have been initiated on the ground that broken rice (kana) amounting to ₹ 44,17,630/- has been given to the rice millers free of cost in lieu of hulling charges on which tax has escaped to assessment. On perusal of first appellate order as well as the tribunal's order the issue is squarely covered in favour of the petitioner wherein similar controversy was involved with regard of broken rice given to the rice millers free of cost in lieu of hulling charges. The order dated 14.11.2017 granting permission to reopen the completed assessment as well as consequential reassessment notice dated 26.12.2017 for the assessment year 2012-13 are liable to be set aside being tantamount to change of opinion which is not permissible under the law - petition allowed.
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2019 (2) TMI 429
Works Contract or not - whether the Build Operate Maintain and Transfer (BOMT) contract entered into by the appellant with the Motor Vehicles Department of the State of Kerala was a works contract or a right to use the goods? - Held that:- The Assessing Officer definitely would look into such contentions and make appropriate deductions as available for a works contract, when taxing the same; if not already done. If the assessment is completed, it is for the assessee to challenge such orders, if deductions in accordance with law, have not been granted - there is no purpose served by a direction in this appeal - appeal dismissed.
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2019 (2) TMI 428
Imposition of penalty u/s 34(8) of the U.P. Vat Act 2008 - delay in deposit of TDS - no deliberate act in defiance of law or contaminous conduct - government department - Held that:- The imposition of penalty under Section 34(8) is in addition to and unaffected by the payment of interest under Section 34(8) - Though the existence of mens rea or dishonest intent is not a prerequisite for imposition of penalty under Section 34(8) as is evident from a bare reading of the said provision and it is a civil liability, if there are bonafide reasons and mitigating factors which explain the delayed deposit of TDS they should be taken into account while taking a decision to impose or not to impose penalty or to determine its extent. Failure to make deduction would however stand on a different footing. In the present case the delay in deposit of TDS for April, May, July, August and October, 2008 ranges from 24 days to 94 days. The Railways should have been conscious of its statutory obligations - Considering the fact that it is not a case of failure to make deduction but of failure to deposit TDS timely and also considering the fact that the matter relates to a Government department, in the facts of the case, the penalty is reduced from ₹ 3,08,296.40/- to ₹ 1541248 i.e. 05% of the TDS. This will act as a deterrent for the future. Tax revision is disposed off.
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