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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter February 21, 2018 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS The exemption available to GTA service for transport of agricultural produce cannot cover the transport of cut wood of trees News 1. Cabinet approves New Bill to ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018 Summary: The Union Cabinet, chaired by the Prime Minister, has approved two bills aimed at protecting investors: the Banning of Unregulated Deposit Schemes Bill, 2018, and the Chit Funds (Amendment) Bill, 2018. The first bill seeks to eliminate illicit deposit-taking activities by imposing strict penalties and creating a framework for repayment to depositors. It includes measures like asset attachment and a central database for monitoring. The second bill aims to improve the Chit Funds sector by allowing video conferencing for subscriber meetings, increasing the foreman's commission, and granting them a right to lien for dues, among other amendments. 2. RBI Reference Rate for US $ Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 64.5254 on February 20, 2018, up from Rs. 63.9097 on February 16, 2018. Based on this rate and cross-currency quotes, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were adjusted. On February 20, 2018, the rates were Rs. 79.8566 for 1 Euro, Rs. 90.1291 for 1 British Pound, and Rs. 60.35 for 100 Japanese Yen. The SDR-Rupee rate will be determined using this reference rate. Highlights / Catch Notes Income Tax Assessing Officer Can Re-examine If Initial Disclosures Are Found Prima Facie Untrue Under Reopening of Assessment Rules. Case-Laws - HC : Reopening of assessment - The opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Assessing Officer from examining the issue. - HC Visit to Get Source High Court Clarifies Section 206AA: DTAA Tax Rates Override 20% TDS on Non-Residents Without PAN. Case-Laws - HC : TDS liability @20% - payment to non-residents not having PAN - the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. - HC Visit to Get Source Court Rules Licensee Not Owner u/s 22; Income Taxed as "Other Sources" Instead of House Property. Case-Laws - HC : Income from house property - Whether a person though a Licensee but has exclusive rights over a property is not owner for the purposes of Section 22? - the said income has to be assessed under the residuary head “income from other sources”. - HC Visit to Get Source Assessee Cannot Claim Depreciation on Land and Building Improvements Due to Non-Qualification Under Tax Laws. Case-Laws - AT : Disallowance of depreciation on building improvement - the assessee is not entitled to the claim of depreciation on such improvements to the land and building for more than one reason - AT Visit to Get Source Assessee Can Deduct Unabsorbed Depreciation for Profit Calculation u/s 115JB of Income Tax Act. Case-Laws - AT : MAT - Unabsorbed depreciation is lower than the amount of brought forward losses therefore in our considered view the assessee is entitled to claim the deduction of unabsorbed depreciation while determining the profit u/s 115JB of the Act. - AT Visit to Get Source Customs Circular Allows Recovery Beyond Deposited Amount; "Shall" in Clause 4.2 Interpreted as "May" for Flexibility. Case-Laws - HC : Whether the circular places an absolute bar of prohibition against the respondents’ recovering an amount in excess of the amount deposited as per the said circular? - It does not - The word “shall” in clause 4.2 must be read as “may” for more than one reason - HC Visit to Get Source Imported Under Pads Reclassified: Not Diapers, But Other Sanitary Articles Under Chapter Sub-Heading 48184090. Case-Laws - AT : Classification of imported goods - Under Pads - Since, the goods in question were not made for fastening into the body, the same should not be termed as baby and clinical diapers and should more appropriately fall under Chapter Sub-Heading of 48184090 which provides for other sanitary articles - AT Visit to Get Source Service Tax High Court Upholds Ban on Using Education Cess Credits for Telecom Service Tax Payments, Citing Articles 14, 19(1)(g), 265, 300A. Case-Laws - HC : Violation of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India - utilization of credit accumulated on account of Education Cess and Secondary and Higher Education Cess for payment of service tax leviable and payable on telecommunication services - HC dismissed the appeal of the assessee. Visit to Get Source GTA Services Tax Exemption Does Not Cover Transport of Cut Wood, Not Classified as "Agricultural Produce. Case-Laws - AT : The exemption available to GTA service for transport of “agricultural produce” cannot cover the transport of cut wood of trees - AT Visit to Get Source Target Incentives Exempt from Service Tax Under Business Auxiliary Services: Clarification on Tax Liability. Case-Laws - AT : Business Auxiliary Service - target incentives not liable to service tax - AT Visit to Get Source Electricity Charges Excluded from Assessable Value for Service Tax on Rental Properties. Case-Laws - AT : Valuation - reimbursable electricity charges - Electricity charges collected from the tenants cannot be formed part of the assessable value for the purpose of service tax as provider of renting of immovable properties. - AT Visit to Get Source Hydroelectric Dam Construction Exempt from Commercial Service Tax; Not Classified as Commercial or Industrial Construction. Case-Laws - AT : Construction services - such work has been carried out as part of the hydroelectric project and construction of dam therefore - these activities are in connection with the construction of the dam and hence excluded from the purview of Commercial or Industrial Construction - AT Visit to Get Source Court Rules Service Tax on Naphtha Throughput Charges Unjustifiable Without Excise Duty Liability. Case-Laws - AT : Transportation service through pipeline / conduit - delivery of naphtha from appellant s terminal to NFCL storage tanks - Just because there is no excise duty liability in respect of the impugned clearances, the attempt of the department to collect service tax in respect of throughput charges, in our opinion, will not pass muster. - AT Visit to Get Source Settlement Commission Can't Resolve Service Tax Issues; Requires Adjudication for Fact Analysis and Legal Interpretation. Case-Laws - Commission : Application for Settlement Commission - the issue of analysing the facts, interpretation of legal provisions and consequently determining the tax liability or otherwise of services merely on the basis of claims made by the applicant vis-a-vis the counter claims made by the department cannot be decided in this forum as in an Adjudication proceeding. Visit to Get Source Settlement Commission Rejects Application Due to Unpaid Service Tax on Admitted Liability. Case-Laws - HC : Application for settlement - Admittedly the petitioner had not paid the full service tax on admitted liability. Settlement Commission was therefore, correct in not entertaining the application for settlement on this ground. - HC Visit to Get Source Immovable property rentals for public amusement like boat rides and skating exempt from service tax due to undefined terms. Case-Laws - AT : Renting of immovable property Service - excluded category - Admittedly, both these properties in the form of land were used for admitting public for general amusement - in the absence of any statutory definition. Boat/balloon ride on the lake, skating in the skating rink will fall under the overall ambit of entertainment - tax liability do not sustain - AT Visit to Get Source Central Excise CENVAT Credit Allowed for Goods Imported Under CTH 98.01 as Capital Goods, Including CVD Portion. Case-Laws - AT : CENVAT credit - Project import - once the goods are imported under CTH 98.01, irrespective of where the goods would be classifiable under CETH, they will become eligible for availment of the CVD portion as capital goods credit - credit rightly allowed. - AT Visit to Get Source Appellant Denied CENVAT Credit on Service Tax for Ocean and Airfreight Charges Beyond Export Port. Case-Laws - AT : CENVAT credit - input services beyond port of export - whether the Appellant are eligible to cenvat credit of the service tax paid on ocean freight and airfreight charges? - Held No - AT Visit to Get Source Court Favors Assessee in Defining "Related Person" for Excise Duty u/s 4, Central Excise Act, 1944. Case-Laws - AT : Valuation - Interpretation of Statute - definition of related person under section 4 of Central Excise Act, 1944, read with definition of "interconnected undertakings" in Section 2(g) of MRTP Act, 1969 - Valuation - related party transaction - mutual interest - close relatives - issues decided in favor of assessee - AT Visit to Get Source Customer Refund Claim Eligible Due to Supplementary Invoice Duty Payment; Subject to Section 11B Compliance Conditions. Case-Laws - AT : Refund claim - customer did not honour the enhanced price of the goods - the duty discharged on the supplementary invoices by the appellants will be eligible for refund, subject to other provisions and conditionalities of section 11B of the Act - AT Visit to Get Source Fibreglass Casting Tapes and Splints Classified as Medical Articles under CETA Code 3004.90 for Excise Purposes. Case-Laws - AT : Classification of goods - fibreglass casting tapes/splints - The said goods actually are in the category of wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), which are meant for use in medical/surgical purpose - classifiable under 3004.90 of CETA - AT Visit to Get Source VAT Section 3(5) of TNGST 1959 Act: Tax Concessions to Promote Industrial Growth Should Be Interpreted Liberally. Case-Laws - HC : TNGST 1959 - Section 3(5) of the Act is a beneficial provision. It provides for concession in tax to encourage industrial activity. It is well settled principle that a taxing provision, granting concessional and incentives for promoting growth and development, should be construed liberally - HC Visit to Get Source Case Laws: GST 2018 (2) TMI 1296 Release of detained goods - the issue covered by the decision in the case of M/s Indus Towers Limited Versus The Assistant State Tax Officer [2018 (1) TMI 1313 - KERALA HIGH COURT], where it was held that The detention of goods merely for infraction of the procedural Rules in transactions which do not amount to taxable supply, is without jurisdiction. The first respondent is directed to release the goods covered by Ext.P5 notice to the petitioner - petition allowed. Income Tax 2018 (2) TMI 1295 Specific performance of contracts - Non performing part of busniss - High Court took the view that rather than Rakesh Kumar, it was the defendants who were not willing to execute the sale deed as the requirement in terms of the agreement to sell that the defendants were obliged to obtain a no objection certificate for executing the sale deed but they had not taken any steps in that regard - Held that:- As gone through the agreement to sell dated 29th May, 1986 and the relevant clause of the contract is remarkably vague and reads as follows: That the vendors will obtain the no objection certificate from the authorities concerned and will inform the vendee by registered post after getting the income tax clearance certificate. There is nothing to indicate the nature of the no objection certificate that the vendors were required to obtain and who were the authorities from whom the no objection certificate was required, nor is there any indication of the purpose for which the no objection certificate was required. Similarly, there is no indication about the nature of the income tax clearance certificate required and for what purpose. This clause appears to have been inserted in the agreement to sell without any application of mind and it is quite possible, as alleged by the vendors that the agreement to sell was ante-dated after the introduction of Section 269-UC in the Income Tax Act, 1961. However, we need not go into this possibility in view of the vague nature of the clause. High Court was in error in setting aside the judgment and decree of the Trial Judge. Accordingly, the appeal is allowed and the judgment and decree passed by the High Court is set aside. 2018 (2) TMI 1294 Nature of expenditure - members’ fee paid by the appellant to the National Stock Exchange - revenue or capital expenditure - Held that:- Alembic Chemical Works Co. Ltd. Vs. Commissioner of Income Tax, Gujarat (1989 (3) TMI 5 - SUPREME Court), elucidates and affirms that a “once and for all payment”, when it brings into existence an asset or advantage of enduring benefit, in the absence of special circumstances leading to an opposite conclusion, is capital expenditure and not attributable to revenue. This is the primary and basic test. The appellant-assessee has not been able to show and establish any special circumstances for an opposite conclusion in the present matter. Further, the expenditure made was for acquiring and bringing into existence an asset or advantage of enduring benefit and not for running business to produce more profits. The question raised, it was observed, should be answered by adopting common sense and not legalistic and theoretical approach. In the context of the present case, “enduring benefit” test and “once and for all” payment test would be the most appropriate and proper tests to apply, though we would accept that there are exceptions to the said principles and these tests might break down in a given case. The expenditure incurred was for acquisition of property and rights of a permanent character. The enduring advantage was in the capital field. - Decided in favour of revenue 2018 (2) TMI 1293 Reopening of assessment - capital gain tax - Deemed dividend u/s 2(22)(a) - Held that:- This entire transaction of transfer of shares by the petitioner to M/s.Nerka Chemicals Pvt. Ltd. came up for scrutiny by the AO during the original assessment proceedings. Of course, the assessee's contention revolved around the issue whether such transaction would invite capital gain tax in the hands of the assessee or not. Nevertheless, this transaction was scrutinized and eventually when the order of original assessment was passed, no additions were made. AO was of the opinion that even though capital gain cannot be charged, the transfer being in the nature of payment of dividend, the assessee had to pay dividend distribution tax, he had to express such opinion in the order of assessment. He cannot have second innings to examine the same transaction from a different angle by resorting to reopening of assessment. The permissibility of change of opinion so resoundingly rejected by the in case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] even post the amendment of section 147 with effect from 01.04.1989 would bar the Assessing Officer from carrying out such fresh scrutiny. - Decided in favour of assessee 2018 (2) TMI 1292 Reopening of assessment - notice issued beyond the period of four years - change of opinion - advances receipt by assessee being undisclosed - independent application of mind by assessee - Held that:- The reasons recorded show that the Assessing Officer had received information from the Investigating Wing in connection with advances of 10.25 Crores [rounded off] received by the assessee from M/s. East West Finvest India Limited during the FY 2009-10 which is relevant to AY 2010-11. M/s. East West Finvest India Limited works as an entry operator and earns bogus funds to provide advances to various persons. Out of the loan of 10.25 Crores received by the assessee from M/s. East West Finvest India Limited, repayment of 1.45 Crores was made. Interest of 3.89 lakhs was also paid. AO further noted that as per information, M/s. East West Finvest India Limited was a paper concern and the advances/loans received by the assessee from such concern were bogus loans and the entire transactions were bogus and sham transactions. That, on the basis of such materials on record that he formed a belief that the assessee had not made true and full disclosures and the income chargeable to tax as therefore escaped assessment. The reasons thus recorded do not proceed only on the information supplied by the Investigating Wing. The Assessing Officer having applied his mind and processed such information, formed his belief that the income chargeable to tax has escaped assessment. Neither the application of mind, nor the formation of belief that income chargeable to tax has escaped assessment on the basis of information available at the disposal of Assessing Officer, have to be expressed in any rigid format in the reasons recorded. Hence, as these two essential requirements can be gathered from the reasons recored, the notice for reopening cannot fail on such basis The opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Assessing Officer from examining the issue. In the present case, as noted, Assessing Officer received additional information after the original assessment was over, on the basis of which he formed a belief that the entire transaction was a sham transaction. What is required is the reason to believe that income chargeable to tax as escaped assessment. Sufficiency of the materials in the hand of the Assessing Officer which enabled him to form such a belief would not be examined - Decided against assessee. 2018 (2) TMI 1291 Anonymous donations received by the Petitioner in dakshina boxes held to be taxable under Section 115 BBC - Held that:- In the present facts, we note that the impugned assessment order dated 31 December 2017 has sought to distinguish the decision relied upon in the present facts. Infact he holds that the trust is not for religious purposes. Therefore will not fall in the exclusion clause under Section 115 BBC (2) of the Act. This understanding of the nature of the trust not being religious but humanistic, of the Assessing Officer may be absolutely incorrect as contended by the Petitioner. However, there is no reason why it cannot be set right in the appeal under Section 246A by the CIT(A). It is an error, if at all within jurisdiction and not an exercise of power outside jurisdiction. The remedy they seek here can be effectively obtained from the Appellate Authority under the Act. So far the apprehension of recovery proceedings being commenced, the Petitioner can under Section 220(6) of the Act approach the Assessing Officer and thereafter the Commissioner of Income Tax as the administrative head to stay the recovery till the disposal of the appeal by the CIT(A). The relief that the Petitioners are seeking before us are reliefs which are equally available before the CIT(A). Therefore, in these circumstances, we are not exercising extra ordinary jurisdiction under Article 226 of the Constitution of India to entertain this Writ Petition. 2018 (2) TMI 1290 Kar Vivad Samadhan Scheme - declaration under Section 88 of the Scheme seeking to settle the tax arrears pending as on 31 March 1998 for the assessment year 1983-84 to 1986-87 - Held that:- From the reading of the impugned order, the Affidavit in Reply filed by the Respondent No. 1 dated 28 April 1999 and Affidavit in SurRejoinder dated 26 July 1999, it is clear that on the date of filing of second declaration i.e. 29 January 1999, there were no arrears of tax payable by the Petitioner to the Revenue. Thus, no fault can be found with the impugned order dated 19 February 1999 rejecting the second declaration dated 29 January 1999. Petition is dismissed. As the Petitioner is entitled to the voluntarily deposited amount of 7,64,630/with the Respondents. This payment/deposit was consequent to what has been recorded in the order dated 30 March 1999. Therefore, on the Petition furnishing evidence of deposit to the Respondent No. 1, the Revenue will refund the amount of 7,64,630/as expeditiously as possible preferably within a period of six months from today. 2018 (2) TMI 1289 Payments made to non-resident entities - TDS liability @20% - payment to non-residents not having PAN - Provisions of section 206AA applicability - Levy of 20% in the case of outward remittances in the hands of the payer the deductor - applicability to assessee that are non-residents of India - Held that:- Having regard to the position of law explained in Azadi Bachao Andolan (2003 (10) TMI 5 - SUPREME Court) and later followed in numerous decisions that a Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. 2018 (2) TMI 1288 Declarations of undisclosed income - Income Declaration Scheme, 2016 - extension of time for making payment of the third installment sought - Held that:- Mere involvement in office work and marketing activities cannot be a good justification and ground to seek and ask for extension of time. Assertion that the petitioners just forget to pay the third installment is unbelievable and a lame excuse. Such declarations are unique and made after due deliberation and thought. Amount payable towards the third installment was substantial. Petitioners were unable to pay the amount and thereafter have pleaded and attributed it to loss of memory. The time period fixed were mandatory and had to be adhered to. The petitioners have not made out an extraordinary case which would have justified invoking writ jurisdiction and grant of further time beyond the time, even assuming that the time stipulated under the Scheme could be extended by the Board under Section 119(2) of the Income Tax Act, 1961. If such excuses are to be accepted, then as a routine, extension of time would have to be granted. No ground and reason to issue notice in the present writ petitions. 2018 (2) TMI 1287 Penalty u/s 271AAA - assessee neither specified the manner of undisclosed income nor substantiate the manner in which the income was derived - tribunal deleted the penalty - Held that:- Commissioner of Income Tax (Appeals) as well as the Tribunal both concurrently found that all the requirements of explanation 5 below subsection (4) of section 132 of the Act were satisfied. With respect to disclosure of the manner in which the income was earned, the said authorities were of the opinion that while recording the statement of the assessee during search, no question regarding this issue was put by the Revenue officer. See Commissioner of Income Tax v. Mahendra C. Shah reported in [2008 (2) TMI 32 - GUJARAT HIGH COURT] wherein held considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under Section 132(4) of the Act. The view taken by the Tribunal as well as Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under Exception No. 2 in Explanation 5 is commendable. - Decided against revenue 2018 (2) TMI 1286 Certificate issued u/s 197 - seeks to cancel/ modify the certificate on the ground that the outstanding demand of 41.86 Crores was not considered at the time of granting the certificate - Held that:- Impugned order dated 23rd October, 2017 has been issued with the concurrence of the Commissioner of Income Tax (TDS). Thus, in the above facts, there is no efficacious alternative remedy available as held by us on similar facts in our order dated 16/25th January, 2018 in M/s. Tata Teleservices (Maharashtra) Limited (2018 (2) TMI 192 - BOMBAY HIGH COURT). In this case, as in Tata Teleservices (Maharashtra) Limited (supra), an order canceling a certificate issued under Section 197 of the Act, was passed on the ground that the aspect of pending demand has not been considered in the context of Rule 28AA of the Income Tax Rules, 1961 while granting the certificate under Section 197 of the Act. This, without furnishing a copy of the reasons recorded at the time of issuing the certificate under Section 197 of the Act. This non furnishing of copy of the reasons recorded was held by us to be a flaw in the decision making process. Thus, making the impugned order unsustainable. Impugned order passed by Respondent No.2, which sets aside and/or withdraws / modifies the earlier certificate issued under Section 197 of the Act, is quashed and set aside. 2018 (2) TMI 1285 Income from house property - Whether a person though a Licensee but has exclusive rights over a property is not owner for the purposes of Section 22? - entitled to 1/5th statutory deduction as claimed in view of various provisions as enshrined U/S 22 to 27 and 269UA or would it constitute income from other sources? - Held that:- The appellant accepts that sub-clauses (i) and (ii) of clause (f) to Section 269UA are not applicable and the appellant does not satisfy the conditions stipulated therein. Contention of the appellant that the license agreement was renewed from time to time is not a ground or reason to hold that the appellant had acquired ownership rights. The license agreement dated 14.01.1986 placed on record does not support the said contention. The new license agreements have not been placed on record. It is equally possible that the license agreement may not have been renewed. The license agreement is not a registered document. The appellant does not even claim that the license agreement is a lease deed. Even otherwise, an unregistered document or an oral lease only creates month to month tenancy and not a lease for a period exceeding one year. Conditions of clause (iiib) to Section 27, would not be therefore satisfied. It has to be held that the appellant was not an owner as defined in Section 27 of the Act. Consequently, the sub-license fee received by the appellant is not chargeable to tax under the head “income from house property”. It is not the case of the appellant that the said income was chargeable to tax under the head salary, profits and gains of business or profession, or capital gains. Thus, the said income has to be assessed under the residuary head “income from other sources”. - Decided in favour of the Revenue 2018 (2) TMI 1284 Rejection of stay application - Held that:- Parameters for consideration of the stay application even under Order 41 Rule 5 of CPC, which governs the Appellate Courts and Civil Courts apply equally to the taxing statutes also. The argument of the learned counsel for the petitioner-assessee is that a high pitch demand has been raised contrary to the decision of the Hon’ble Supreme Court also does not persuade this Court enough to cut short the process of deciding the regular appeal to be heard by the Tribunal against the tax demand of 145.15 crores and interest to the extent of 98.83 crores totalling to 243.98 crores approximately. The assessee had sought Stay of 172,45,08,305/- of net demand and a sum of 70 crores had already been paid by the petitioner- assessee. Tribunal had itself given a suggestion in para-2 quoted above of the impugned order, that if the assessee further deposits a sum of 51 crores in addition to 70 crores already deposited against the total demand of 242.45 crores, the Tribunal may consider the grant of Stay for the remaining demand, but since the learned Authorised Representative for the assessee before the learned Tribunal declined the said suggestion, the learned Tribunal proceeded to consider the stay application on its merit and passed the aforesaid order. This Court is not inclined to tinker with the said impugned interlocutory order in the present writ petition because as far as entertaining of the writ petitions against such interlocutory orders under Article 226 of the Constitution of India is concerned, the scales of justice cannot be different for the Revenue and for the assessee, and for this Court, both the parties, in such circumstances, are equally placed. 2018 (2) TMI 1283 Addition on account of mileage rebate - AO rejected the claim of the assessee on the basis of the earlier years figures as well as the statement of three dealers without verifying the documentary evidence filed by the assessee - Held that:- The documentary evidence placed on record by the assessee is very much relevant to decide the issue relating to the assessee’s claim that the entire mileage rebate having been distributed to the concerned dealers, there was no income that actually accrued to the assessee on account of mileage rebate and since neither the A.O. nor the Ld. CIT(A) appear to have verified the same, consider it fair and proper and in the interest of justice to give one more opportunity to the assessee to putforth its case. The impugned order of the Ld. CIT(A) is accordingly set aside and the matter is restored to the file of the A.O. for deciding the same afresh after giving the assessee one more opportunity to establish its case. - Decided in favour of assessee for statistical purposes. 2018 (2) TMI 1282 Addition on account of arm’s length price adjustment - selection of comparable - Held that:- The assessee is responsible for processing informations contained in the resumes according to the pre-set criteria developed by AEs and including it into Search Palace. The database of resumes and Search Palace are accessible by AE’s global operations. The assessee is also responsible for ensuring quality and consistency in data entry for Search Palace, database, minimize duplication of effort and reuse of information and to move into more proactive research work for business development. In addition to maintain data for the Search Palace database, the assessee also supports its AE’s in performing adhoc research work and news alerts, thus companies functinally dissimilar with that of assessee need to be deselected from final list. Deduction u/s 10A - action of the AO in excluding the foreign currency expenditure towards communication charges and database expenses - from the export turnover without reducing the same from the total turnover - Held that:- Respectfully following the aforesaid referred to order in the case of DCIT Vs Global Logic India (P) Ltd.[2012 (12) TMI 1018 - ITAT DELHI] we direct the AO to reduce the aforesaid expenses out of the export turnover as well as the total turnover while working out the deduction u/s 10A 2018 (2) TMI 1281 Entitlement for exemption u/s. 80(P)(2) - assessee being a Primary Agricultural Credit Co-operative Society registered under the Kerala Co-operative Society Act - Held that:- Hon’ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd vs. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). The assessee is admittedly only providing credit facilities to its members during the relevant AY’s. The assessee is primary agricultural credit society and has produced a certificate of Registrar of Co-operative Societies under Kerala Co-operative Societies Act, 1969 to the above effect. Since the Hon’ble Kerala High Court has categorically held that a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2) of the Act, CIT(A) is justified in directing the Assessing Officer to grant the benefit of deduction u/s. 80P(2) - Decided in favour of assessee. 2018 (2) TMI 1280 Determination of ALP of international transaction qua payment of royalty - TPO has disallowed the royalty payment on the ground that the taxpayer has not been able to prove any real tangible benefit that has passed to him by technology received from its AE - Held that:- When AE has granted exclusive nontransferable and non-divisible licence to use the technical information for manufacture, to use Yamaha trademark and permit the company dealers to use the Yamaha trademark in the course of marketing activities in India and then paid the royalty at predetermined rate, it is not the prerogative of the TPO to decide if any tangible benefit has been transferred to the taxpayer from the technical know-how received from its AE because decision of a businessman for business expenditure or payment of royalty for running the business cannot be interfered by the TPO in any manner. Liability of the business expenditure and adjustment of ALP cannot be made on the basis of the fact no benefit has been accrued to the taxpayer. It is only for the businessman to see as to how to execute the decision for better running of the business. TPO/DRP have erred in making adjustment of ALP on account of royalty payment by the taxpayer to its AE - Decided in favour of assessee 2018 (2) TMI 1279 Addition u/s 14A r.w.r. 8D - proof of having any exempt income - Held that:- In the present case, it is an admitted fact that the assessee was not having any exempt income which is evident from para 3.2.4 of the impugned order passed by the learned CIT(A) wherein it has been categorically stated that the assessee company had not earned any exempt income during the year. The said observation of the learned CIT(A) was not rebutted. As decided in Cheminvest Ltd. Vs CIT-IV [2015 (9) TMI 238 - DELHI HIGH COURT] section 14A will not apply if no exempt income is received or receivable during the relevant previous year. In the present case also no exempt income was claimed by the assessee therefore, the disallowance made by the AO u/s 14A of the Act was rightly deleted by the learned CIT(A). - Decided in favour of assessee 2018 (2) TMI 1278 Penalty u/s 271(1)(c) - addition for outstanding expenses for purchase of goods and expenses u/s. 68 and addition of opening balance of Deposits - summons u/s.131 - Held that:- A.O. had issued summons u/s.131 to (1) Vikibhai M. Raval (2) Bakulbhai Panchal and (3) Vijay Mahasan and had recorded their statements. On the basis of such statements addition of 7,50,572/- was made. The appellant was not informed about the statements recorded u/s.131 of the I.T. Act, 1961 and despite of the fact, appellant wrote a letter to the AO on 10/07/2012 to provide copies of statements of all the parties those were examined by the ld. AO u/s.131. But neither opportunity of cross examination nor statement u/s.131 was reported by the AO and supplied to the appellant and made an addition without informing the appellant. Since AO has not given any chance to cross examines the person whose statement were recorded u/s.131. Moreover, statement of above said persons were not supplied to the appellant and same is amount to miscarriage of justice. Ld. AO ought to have supplied the statement and thereafter given him chance to cross examine the person though statement was recorded by the AO. In such circumstances penalty cannot be levied, hence deleted. - Decided in favour of assessee. 2018 (2) TMI 1277 Claim of depreciation in respect of vehicles which were registered in the name of directors of the assessee company - Held that:- The assessee is entitled to claim of depreciation on cars which are registered in the name of directors, where the funds for purchase of the said vehicles has been paid by the assessee company and the same have been shown as asset of the assessee company and also the vehicles were used by the assessee company. In view thereof, we allow the claim of depreciation in the hands of assessee. Disallowance of remuneration paid to the directors - whether no commission is to be paid on the sales made by the assessee to its sister concern namely K.K. Cans 2,91,362/-. The assessee has explained that the cash expenditure made on behalf of customers has been recovered from the customers through sale invoices, etc. Accordingly, where the assessee had not claimed the aforesaid expenditure made in cash as deduction, in the Profit and Loss Account, then the same is not hit by provisions of section 40A(3) of the Act. - Decided against revenue Diversion of profits - addition u/s 40A - items which were sold by assessee to its sister concern were in turn, sold to third party and hence the assessee had diverted profits to its sister concern - Held that:- The provisions of section 40A(2)(a) of the Act are attracted where the assessee incurs expenditure in respect of which payment has been made to a person referred to in clause (b). The assessee in the present case has not incurred any expenditure nor claimed the same but has shown sale of its products to its sister concern. Hence the order of Assessing Officer in invoking provisions of section 40A(2)(a) of the Act is misplaced; even though the assessee had sale transactions with its sister concern - Decided against revenue 2018 (2) TMI 1276 Reopening of assessment - receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills - CIT(A) restricted the disallowance to 12.5%. - Held that:- Tribunal already [2018 (2) TMI 1201 - ITAT MUMBAI] found the addition as estimated by Ld. CIT(A) to be reasonable one and dismissed the revenue’s appeal and therefore, the same view may be taken here. The Ld. Authorized Representative [AR] for assessee, while conceding the same, pleaded for further relief. We concur with the stand of the revenue that a view has already been taken by the Tribunal on factual matrix against revenue’s appeal. It is also noted that the said order is co-authored by one of us and therefore, respectfully following the same, holding that the estimated addition was reasonable one, we dismiss assessee’s appeal. 2018 (2) TMI 1275 Disallowance of interest u/s.36(1)(iii) - CIT-A deleted the addition as interest bearing funds were used for non-business purposes - Held that:- The finding of CIT(A) that the assessee had sufficient non-interest bearing funds available with it for partners withdrawals, was not controverted by the DR by bringing any cogent and positive material on record. Further, the finding of CIT(A) that the payment of interest was commercially expeditent was examined by the AO in the current and prior years. Therefore, the contentions of AO for diversion of interest bearing borrowed funds to the partners of the sister concern of the assessee cannot be sustained, was also not controverted by the DR by bringing any cogent and positive materials on record. Hence, we do not find any good and justifiable reason to interfere with the order of CIT(A) - Decided against revenue 2018 (2) TMI 1274 Addition u/s 56(2)(vii)(b) r.w.r. 11UA of the IT Rule, in respect of the equity shares issued by the assessee company - Held that:- In view of the statutory provisions giving options to assessee to adopt any of the methods which can be compared with the Net Asset Value Method and the AO shall adopt the value whichever is higher. In the case of the assessee the Fair Market Value determined as per the discounted cash flow method at 54.98 per share which is higher than the valuation adopted by the AO as per the Net Asset Value at 26.69 per share. Therefore, the share allotted at 40 per share is within the fair market value as determined by adopting the discounted cash flow method. The Assessing Officer has not found any serious defect in the facts and details used in determining the fair market value under discounted cash flow method. Hence, we do not find any error or illegality in the impugned order of the Ld. CIT(A) qua this issue. TDS u/s 194C - Disallowance u/s 40(a)(ia) - non deduction of tds on handling charges - payment in question to the shipping agents of Non-Residents ship owners - Held that:- as per the CBDT Circular No. 723 dated 19/09/1995 payment made to the shipping agents of Non-Resident ship owners does not require deduction of tax at source. We further note that the Director International Taxation vide Certificate dated 23/06/2011 and 28/03/2013 respectively granted the exemption to the Non-Resident ship owners in question from deduction of tax at source. The assessee filed these certificates which are placed at page no. 13 and 14 of the paper book. Therefore, when the Department has already granted the exemption certificate to the Non- Resident ship owners then there is no obligation on the assessee to deduct tax at source in respect of the payment made to the shipping agents of these Non-Resident ship owners. Claim of entry tax disallowed on the ground that the assessee has not furnished any proof of payment - Held that:- We find that the E-challan dated 26/4/14 for sum of 1,37,635/-contains the details of assessee i.e. its name as well as address. The assessee has clarified that this amount of 1,37,635/- includes 1,35,313/- as entry tax and balance as interest. The AO has disallowed this amount for want of proof of payment whereas the assessee had produced this e-Challan dated 26/04/2014 having all the details. Accordingly, in view of the fact that, the e-Challan dated 26/4/2014 contains all relevant details including name of the assessee the AO is directed to verify details of the e-Challan and then allow the claims made on this account. 2018 (2) TMI 1273 Validity of Assessment u/s 143(3) - assessment for Assessment year 2009-10 has been framed by an order dated 31.12.2010 u/s 143(3) instead of section 153C - Held that:- since the date of satisfaction note is 4.10.2010, the year of search would be Assessment year 2011-12 and as such, based on the said note, six assessment years for framing assessment u/s 153C of the Act would be assessment year 2005-06 to assessment year 2010-11. In the instant case, assessment for Assessment year 2009-10 has been framed by an order dated 31.12.2010 u/s 143(3) of the Act; instead of section 153C of the Act. Accordingly, the Assessing Officer was incorrect in assuming jurisdiction u/s 143(3) of the Act for Assessment year 2009-10. Assessing Officer ought to have framed the assessment for assessment year 2011-12 under section 143(3) of the Act and not for the instant assessment year i.e. assessment year 2009-10. It is thus held that the Assessing Officer was incorrect in assuming jurisdiction u/s 143(3) of the Act for assessment year 2009-10 and, therefore, the present assessment is not valid. The additional ground raised is therefore, allowed in favour of assessee. 2018 (2) TMI 1272 Adjusting the unabsorbed depreciation while computing the book profit u/s 115JB - MAT application - Held that:- We find that the amounts of brought forward losses are greater than the amount of unabsorbed depreciation. The assessee is entitled for unabsorbed depreciation amounting to 37,35,12,000/- only. There was a profit in the assessment year 2002-03 for 2,79,09,000/- before the claim of the depreciation pertaining to that AY 2002-03. However, in the year under consideration the assessee had shown brought forward business losses of 1,60,85,45,000/- and unabsorbed depreciation of 37,35,12,000/-. Unabsorbed depreciation is lower than the amount of brought forward losses therefore in our considered view the assessee is entitled to claim the deduction of unabsorbed depreciation while determining the profit u/s 115JB of the Act. The amount of unabsorbed depreciation is inclusive of the deprecation pertaining to the assessment year 2002-03 for 6,67,29,000/-. Thus, it cannot be concluded that the amount of unabsorbed depreciation 6,67,29,000/- is not eligible for deduction while that determining the book profit u/s 115JB of the Act. - Decided against revenue. No hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Disallowing depreciation @ 25% on computers instead of 60% claimed by it - Held that:- In the instant case, the issue relates to the rate of depreciation claimed by assessee on computer(s) and its accessories. The assessee in the immediate preceding Assessment Year i.e. 2003-04 claimed depreciation on computers @ 60% whereas the AO allowed depreciation @ 25% on the computers(s) on the ground that sufficient documentary evidence were not produced by the assessee during assessment proceedings pertaining to the AY 2003-04. The assessee has filed the documents before Ld. CIT(A) which is still sub judice. The AO on the basis of disallowance made in the immediate preceding AY also made similar disallowance on the opening WDV in the year under consideration. On perusal of impugned appellate order, we note that Ld. CIT(A) in the immediate preceding AY i.e. 2003-04 has directed the AO to verify the necessary records and adjudicate the issue accordingly. As none of the party has brought to our notice about the outcome of the order passed by Ld. CIT(A) in the immediate preceding Assessment Year.We also note that the ld. CIT-A in the instant case has given very clear & unambiguous direction for adjudication of the impugned issue of depreciation. Therefore we do not find any infirmity in the order of ld. CIT(A). Ground of assessee is allowed for statistical purpose. Disallowance paid to LIC on account of contribution in respect of gratuity fund - Held that:- The impugned issue is duly covered in favour of assessee and against the Revenue by the judgment of Hon'ble Supreme Court in the case of Taxtool [2009 (9) TMI 66 - SUPREME COURT] Interest u/s 234B is not leviable if taxes paid under the provision of Minimum Alternate Tax (MAT) u/s. 115JB - Held that:- The issue stand covered against the assessee and in favour of Revenue by the judgment Hon'ble Supreme Court in the case of JCIT vs. Rolta India Ltd.[2011 (1) TMI 5 - SUPREME COURT OF INDIA]. Entitlement to choose 10 consecutive years out of 15 years for deduction u/s 80-IA and consequently allowing deduction @ 100% of the profit - Held that:- We hold that the assessee has the discretion to choose the initial year out of the block of 15 years. Thereafter the assessee would claim the deduction as per the provision of section 80-IA for the remaining year but subject to the block of 15 years. - Decided in favour of assessee. Allowing certain receipts as deduction u/s 80-IA - Held that:- The facts of the present case are identical to the case BSNL (2015 (12) TMI 1531 - ITAT DELHI) which was decided in favour of assessee. In the case on hand the AO made the disallowance of the deduction claimed by the assessee under section 80-IA of the Act in respect of certain receipts/ income i.e. Interest on Money deposited, Provision/liabilities written back, Bad debt recovery, Bounce cheque charges, Cell site sharing revenue and other income. Thus respectfully following in the case of BSNL (Supra) we direct the AO to allow the deduction under section 80-IA in respect of its receipts. Thus the ground of appeals raised by the Revenue is dismissed and the grounds of appeals raised by the assessee is allowed. Non-deduction of TDS on domestic roaming charges under section 40(a)(ia) - Held that:- We hold that the payment of roaming charges does not fall under the ambit of TDS provisions either u/s.194C/194I or 194J and hence we have no hesitation in directing the Learned Assessing Officer to delete the addition made u/s. 40(a)(ia) on this account. Customs 2018 (2) TMI 1271 Recovery proceedings - Refund u/s 27(1) of the Customs Act, 1962 - appropriation towards the petitioner’s liability arising out of an order dated 25.04.2016 - duty drawback - whether the adjustment of a refund granted amounts to a coercive step? - Held that: - It does - Merely because an amount is lying with the respondents the adjustment thereof by the respondents, makes no difference. The unilateral action of adjustment constitutes a coercive measure as much as any step or action to recover an amount lying with the petitioner or with any other party on behalf of the petitioner. Whether the circular places an absolute bar of prohibition against the respondents’ recovering an amount in excess of the amount deposited as per the said circular? - Held that: - It does not - The word “shall” in clause 4.2 must be read as “may” for more than one reason. Firstly, if it is read as “shall” and not as “may”, the circular would be contrary to section 142 of the Customs Act, 1962. Had we not construed the word “shall” as “may”, we would have readily struck down paragraph 4.2 of the circular as being contrary to section 142 and, therefore, illegal. In our view, however, the word “shall” must be read as “may”. The validity of the circular is accordingly upheld subject, however, to the word “shall” therein being read as “may”. In the present case, one of the reasons for passing the order is that an appeal had not been filed in the name of one of the proprietary firms. That is irrelevant. These are not firms established under the Partnership Act, 1932, or incorporated under the Companies Act, 1956. They are merely the names in which the petitioner carries on business as the sole proprietor thereof. The name in which the petitioner carries on business is not relevant. Proceedings cannot be filed in such name or names. The petitioner having filed the appeal, therefore, serves the purpose of challenging the demand. The impugned order is quashed and set aside - respondents shall be entitled to encash the bank guarantee. The respondents shall be entitled to retain the amount deposited and the amount recovered under the bank guarantee but subject to the fresh orders and the result of the challenge thereto, if any. Petition disposed off. 2018 (2) TMI 1270 Penalty u/s 114 (i) of CA 1962 on main appellant and Director - export of red sanders - prohibited goods - Held that: - The fact that there was a mis-declared export consignment for which shipping bill was filed by M/s. Bhavya Exports at Air Cargo , Jaipur is not in dispute - The close examination of the facts analyzed by the impugned order makes it clear that the appellants cannot be de-linked from the responsibility of involvement in such improper attempt to export of the items. The present appellants were imposed with a penalty of 10 lakh and 5 lakh, perhaps, on the reason that they were master mind behind such action - interest of justice would be met if the quantum of penalty reduced to 5 lakhs and 2.5 lakhs respectively - appeal allowed in part. 2018 (2) TMI 1269 Classification of imported goods - projectors of a kind which are principally used in an Automatic Data Processing System - While the appellant claims that the projectors imported by it were principally used in an Automatic Data Processing System (ADPS for short, which usually refers to computers) and are thus entitled for exemption, the Revenues case is that the projectors are equally usable in ADP systems as well as with Non-ADP equipments such as DVD Players, Set Top Boxes etc. and thus fall under the residuary heading 85296900 to which the exemption does not apply - whether the projectors imported by the appellant during the period November 2014 November 2016 were entitled for the benefit of Notification No.4/2005-Cus dated1.3.2005 (at Sr. No.17) which grants full exemption from payment of Basic Customs Duty to all goods falling under heading 85286100 of the Customs Tariff? Held that: - specific technical differences between projectors of a kind used with ADPS and those used principally with non-ADPS equipment was explained before the Commissioner and brochures containing technical specifications of projectors of these two different kinds were also placed before him in a 99 page compilation - Since the appellant had made categorical assertions about the technical differences and had also backed them up by producing brochures of different manufacturers, the Commissioner was to deal with this crucial submission. The appellant had adequately discharged the initial burden of proof which lay upon it. The burden of proof then shifted upon the Revenue to prove that the technical differences cited were either irrelevant or non-existent. No such attempt has been made by the revenue either in the Show Cause Notice or in the impugned order - the revenue has failed to produce any evidence to rebut the appellants contention or to disprove the evidence produced by the appellant. The evidence on record establishes that the initial burden which lay upon the importer-appellant for claiming the benefit of an Exemption Notification has been adequately discharged by it. The Revenue has not been able to discharge its burden of disproving or rebutting the evidence placed by the appellant-importer. As such, the findings of the Commissioner in the order on the issue of classification cannot be sustained. Extended period of limitation - Held that: - It is a settled law that any statutory amendment is prospective in its operation unless it is specifically declared to have retrospective operation. The Finance Act, 2016 does not contain any provision according to a retrospective operation to the said Act. As such, demands which had already become irrecoverable as on 13.5.2015 could not, by virtue of the amendment with effect from 14.5.2016 get resurrected or revived - the demand for the period prior to 13.5.2015 was barred by limitation. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1268 Valuation - enhancement of value of imported goods i.e. PVC Flex Sheet Rolls - contemporaneous imports - Held that: - in the absence of any contrary evidence to the finding recorded by the First Appellate authority, the Revenue's appeal is devoid of merits - respondent has filed cross-objections which are actually in support of the First Appellate Authority's order and has annexed various documents indicating the contract signed by them with the Chinese manufacturer/exporter and also the prices which have been offered to them. When these documents were produced before the First Appellate Authority, which have been considered by the said authority and the integrity and genuineness of the documents has not been contested by the Revenue in the appeal. Appeal dismissed - decided against Revenue. 2018 (2) TMI 1237 Classification of imported goods - Under Pads - appellant claimed the classification under CTH 48184090 and the department sought to classify the said goods under CTH 48184010 - Held that: - the product is essentially having the characteristics of the disposable under pads which are technically known as disposable bed pads/ bed sheets - Since, the goods in question were not made for fastening into the body, the same should not be termed as baby and clinical diapers and should more appropriately fall under Chapter Sub-Heading of 48184090 which provides for other sanitary articles - appeal allowed - decided in favor of appellant. Corporate Laws 2018 (2) TMI 1267 Winding up petition - Held that:- The Court, having heard learned advocate Ms. Chandarana for the appellant and having considered the contents of the report with the documents annexed therewith especially liquidator's Statement of Account for the windup, finds that the prayers made for dissolution of the company could be granted in exercise of powers under Section 497 of Act. In view of the above M/s. Kelur Investments Private Limited (the Company in voluntary windup) is order to be dissolved under Section 497 of the Act from the date of the report. However, the voluntary liquidators Ms. Gira Sarabhai, Mr. A.R. Mehta and Mr. D.S. Mehta, shall preserve the Books of Account of the company for a period of 5 years from the date of the report. The Directors of the company shall pay office expenses of 10,000/- to the official liquidator for submitting present report within a period of three weeks from the date of intimation of the present order to them. Service Tax 2018 (2) TMI 1264 Vires of N/N. 22/2015-CE(NT) dated 29th October, 2015 - Violation of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India - utilization of credit accumulated on account of Education Cess and Secondary and Higher Education Cess for payment of service tax leviable and payable on telecommunication services - grievance of the petitioners is, and they claim a vested right to avail benefit of the unutilized amount of EC or SHE credit, which was available and had not been set off as on 1st March, 2015 and 1st June, 2015 for payment of tax on excisable goods and taxable services respectively. Statutory effect of withdrawal of EC and SHE on excisable goods and taxable services with effect from 1st March, 2015 and 1st June, 2015 respectively, pursuant to the Finance Act, 2015 - Held that: - Omission of a provision signifies deletion of that provision and is normally not treated as different from repeal. The repeal/omission in the present case was not made retrospectively, but applied prospectively. Manufacturers and output service providers were entitled to take benefit of EC and SHE credit on the EC and SHE payable on manufactured goods and output services on or before the cut off date, i.e., 1st March, 2015 in case of manufactured goods and 1st June, 2015 in case of taxable services. They have not been allowed to take credit after the said two dates for the simple reason that EC and SHE ceased to be applicable and were no longer payable after the said dates. The provisos added to Rule 3, sub-rule (7) in clause (b) are really in the nature of concessions confined to a limited and narrow set of cases and are not of general application. Noticeably, they expand the scope and give benefit of utilization of accumulated EC and SHE against payment of excise duty and service tax, which was not the position prior to 1st March, 2015 and 1st June, 2015, respectively. It is also easily apparent as to why the said benefit or concession was granted. These cases certainly fall in a distinct and separate class. The said classification would not fall foul of vice of discrimination. Article 14 is not offended. In fact the petitioners do not challenge and question the provisos, albeit seek additional benefit and concession beyond those granted, even though they were never available earlier. It is no doubt true that the two cesses, in the present case, were in the nature of taxes and not fee, but it would be incorrect and improper to treat the two cesses as excise duty or service tax. In the present case, credit of EC and SHE could be only allowed against EC and SHE and could not be cross- utilized against the excise duty or service tax. In fact, what the petitioners seek is an amendment of the scheme to allow them to take cross utilization of the unutilized EC and SHE upon the two cesses being withdrawn against excise duty and service tax, though this was not the position even earlier. Both EC and SHE were withdrawn and abolished. They ceased to be payable. In these circumstances, it is not possible to accept the contention that a vested right or claim existed and legal issue is covered against the respondents. Petition dismissed - decided against petitioner. 2018 (2) TMI 1263 Benefit of N/N. 25/2012 dated 20.06.2012 - transportation of timber/wooden logs, which are used by them as raw materials in their manufacture - scope of the term “agriculture” and “agricultural produce” in terms of Section 65 B - Held that: - Cutting/logging of trees for timber for further industrial use can more appropriately come under “Forestry Operations”. Cultivation relates more to plants, various crops etc. There is a clear distinction between plant/crop and trees - Harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity. In the absence of categorical evidence recorded to the contrary, it is to be considered that timber now under considerations is wholly or partly out of spontaneously grown trees and not all are product of deliberate cultivation due to human agency or effort, that income cannot be treated as agricultural income. The exemption available to GTA service for transport of “agricultural produce” cannot cover the transport of cut wood of trees - appeal allowed - decided in favor of Revenue. 2018 (2) TMI 1262 Penalty - assessee provided taxable as well as exempted services which calls for maintenance of separate accounts on credit availed on input services - Rule 6(3) of CCR 2004 - Held that: - There is no separate identifiable service attributable to investment portion of the premium in the present case. In other words the premium amount received was invested substantially and for managing such investment, administration charges are collected and Service Tax paid. No other service, least of all exempted service, could be identified in such arrangement - we are in agreement with the method of calculation adopted by the Original Authority in arriving at the portion of exempted service/ taxable service. Appeal allowed - decided in favor of Appellant. 2018 (2) TMI 1261 Whether the foreign language training institute imparting training and coaching in English, Spanish, French and German, are eligible for exemption under Notification No. 9/2003-ST dated 20.06.2003 and Notification No. 24/2004-ST dated 10.09.2004 or are taxable under the category of commercial training and coaching service or not? Held that: - Tribunal in the case of M/s. British School of Language, New Delhi vs. CST, Delhi [2017 (4) TMI 97 - CESTAT NEW DELHI] wherein this Tribunal relying on the decision of M/s. Alliance Francaise De Delhi vs. CST, Delhi [2017 (3) TMI 119 - CESTAT, New Delhi] held that imparting training in foreign language will make the institute vocational training institute. Therefore, they are entitled for exemption under Notification No. 24/2004 ST dated 10.9.2004. Time limitation - Held that: - initially the appellant has registered and paid the service tax. But the Joint Commissioner vide order dated 5.10.2005 has observed that the activity undertaken by the appellant is not taxable - extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1260 Classification of services - Administrative Charges - Revenue entertained a view that such Administrative Charges are liable to be taxed under the category of Real Estate Agent service - Held that: - similar dispute came up before the Tribunal on earlier occasions also including in the case of appellant s sister concern Ansal Housing Construction Ltd. vs. CST, New Delhi [2017 (11) TMI 546 - CESTAT NEW DELHI] where it was held that the appellant are not liable to service tax under Real Estate Agent service - appeal allowed - decided in favor of appellant. 2018 (2) TMI 1259 Classification of services - some contracts executed by the appellant for the Delhi Jal Board (DJB) in which nature of work involved replacing of old damaged water line, for improvement of water supply in various villages as well as replacement of badly silted and damaged sewer lines - case of Revenue is that the services rendered by the appellant are classifiable under Management, Maintenance or Repair Service defined under Section 65 (4) of the Finance Act, 1994 - Held that: - The nature of the activity involves replacement of defective pipelines as also de-silting and repairing of existing pipelines - It is seen that the contract is for replacement of pipelines in specified segments. It is not in the nature of an ongoing maintenance contract. The perusal of the contract further reveals that the same is not in the nature of construction or laying of pipelines/conduit. After considering the nature of the activity undertaken by the appellant and perusal of a few sample contracts, it is found that the service is more specifically covered under the category of Commercial and Industrial Construction, under the Sub-clause (d) of Section 65 (25b) - further, the activity has been executed for Delhi Jal Board which is not a commercial organization. The classification under Management, Maintenance or Repair will not cover the activities of the appellant since these are not in the nature of Maintenance Contract for specified period. The activities are classified under Commercial Industrial Construction and further will not be liable of payment of Service Tax during the disputed period in as much as the activity carried out is for Delhi Jal Board which is not a commercial organization - appeal allowed - decided in favor of appellant. 2018 (2) TMI 1258 Demand of interest - whether the respondent is liable to pay interest on Cenvat Credit which was taken by the appellant but reversed subsequently? - Held that: - the issue has come up before the Hon’ble High Court of Karnataka in the case of CCE, Bangalore Vs. Bill Forge Pvt. Ltd [2011 (4) TMI 969 - KARNATAKA HIGH COURT], where it was held that The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise - since the credit which has been taken by the respondents has not been utilized before the same has been reversed, we find no merit in the view of Revenue that interest is payable. Valuation - includibility - various expenses incurred by the respondent towards telephone, insurance, freight, courier etc - Held that: - The fact whether certain services are eligible for Cenvat Credit as input service is to be determined on the basis of definitions in the Cenvat Credit Rules, 2004. There is no justification for adding the value of such input services in the total assessable value for payment of service tax only for the reason that such Cenvat Credit have been taken. Business Auxiliary Service - target incentives - Held that: - the issue already stands settled in favour of the respondent in the case of Sharyu Motors V/s CST, Mumbai [2015 (11) TMI 229 - CESTAT MUMBAI], in which an identical issue has come up and the Tribunal, where it was held that Service Tax liability confirmed against the appellant on the amount received as incentive for achieving the targets under Business Auxiliary Services is unsustainable and liable to be set aside - demand set aside. Appeal dismissed - decided against Revenue. 2018 (2) TMI 1257 Valuation - reimbursement of electricity charges - Whether during the 01.06.2007 to 30.09.2011, the respondent herein required to pav service tax amount collected from their tenants as reimbursable electricity charges or otherwise? Held that: - there no dispute as to the fact that the demand of service tax for the period question is in respect of an amount collected toward electricity charges of the conveyor belt hired on rent - similar issue in respect of inclusion of amounts collected from the respondents towards certain common services i.e. electricity charges was considered by the Bench in the case of ICC Realty (India) Pvt. Ltd. [2013 (12) TMI 854 - CESTAT MUMBAI], where it was held that Electricity charges collected from the tenants cannot be formed part of the assessable value for the purpose of service tax as provider of renting of immovable properties. Appeal dismissed - decided against Revenue. 2018 (2) TMI 1256 Commercial and Industrial Construction Services - Construction services - Maneri Bhali Hydro-Electric Project - LARJI HYDRO-ELECTRIC PROJECT - Held that: - From the description of work executed by the assessee in the Maneri Bhali Hydro-Electric Project, we note that it is in connection with construction of barage, intake sedimentation chamber etc. There is no doubt that such work has been carried out as part of the hydroelectric project and construction of dam therefore - these activities are in connection with the construction of the dam and hence excluded from the purview of Commercial or Industrial Construction”. With reference to the work executed by the assessee for Himachal Pradesh Electricity Board, such work involves construction of highway tunnel which is extension of existing highway tunnel. Construction of tunnel is specifically excluded from the purview of “Commercial and Industrial Construction - no service tax is liable for such construction activities. Business Support Services - certain amounts booked under “miscellaneous receipts” - Held that: - no documentary evidence was produced by the assessee but, assessee is in a position to provide copies of all the documents evidencing the fact that such miscellaneous receipts do not pertain to receipt of any consideration towards provision of any service - matter placed on remand for reconsideration. Decided partly in favor of assessee and part matter on remand. 2018 (2) TMI 1255 Refund claim - Management, maintenance and repair services - unjust enrichment - Held that: - the appellant has not produced the complete contracts entered into between it and the service receivers - Since for ascertaining the fact of applicability of the doctrine of unjust enrichment, the documents are required to be scrutinized in proper perspective - the impugned order passed by the Commissioner (Appeals) in rejecting the refund application of the appellant is in consonance with the statutory provisions. Matter remanded back to the Original Authority for verification of the details of the contracts to be produced by the appellant - appeal allowed by way of remand. 2018 (2) TMI 1254 Cable operator services to the subscribers - Penalties - Held that: - What is being contended is that tax has been demanded even on amounts shown in the notebook as due from customers - the interests of justice would be served by remanding the matter for the limited purpose of examining this contention of the appellants and possible rework the tax liability - appeal allowed by way of remand. 2018 (2) TMI 1253 Refund claim - the service provided appears to be outside the provisions of Rule 6A of Service Tax Rules, 1994, hence the refund claim filed by the respondents sought to be rejected - Held that: - in this case the respondent is located in India and providing services to the customers of their principal located outside India on behalf of their principal in India - as the respondent service in India to the customers of their principal located outside India, therefore, the said services are provided by the respondent on behalf of the principal outside India who is located outside India, are the export of service. Appeal dismissed - decided against Revenue. 2018 (2) TMI 1252 Transportation service through pipeline / conduit - Department took the view that delivery of naphtha from appellant s terminal to NFCL storage tanks through pipeline amounts to providing taxable services under the category transportation of goods through pipeline and that therefore the amount of 135/- per MT collected for this purpose will require to suffer service tax, for the period January 2005 to February 2006. Held that: - There is an understanding that in case of any loss of goods during the transportation, it is the appellants who bear the loss and in fact have even paid excise duty on the loss quantity value, so also under the agreement, the sale by the appellant to NFCL is complete only when naphtha reaches the storage tanks. The appellant is not required to discharge excise duty liability on the sale of naphtha made to NFCL by availing N/N. 6/2002-CE. Just because there is no excise duty liability in respect of the impugned clearances, the attempt of the department to collect service tax in respect of throughput charges, in our opinion, will not pass muster. Reliance placed in the case of M/s. Grasim Industries Ltd. Versus C.C.E. Indore [2016 (5) TMI 87 - CESTAT NEW DELHI], where it was held that The transport of chlorine through pipeline is done by the appellant in their own account and the delivery on sale is made to the buyer. The transportation charges are included as a consideration for sale and to discharge central excise duty. Therefore, no justifiable legal basis found to sustain any service tax liability on the appellants. 2018 (2) TMI 1251 GTA Service - reverse charge - concessional rate of tax @25% - Notification No. 32/2004-ST - Department took the view that notification exemption is not available to appellant as there was no evidence to show that the conditions of the notification were fulfilled. Held that:- On appreciating the aforesaid chronological events and various clarifications of CBEC and in particular the circular No. 137/154/2008-CD.4, dated 21.08.2008, it is but evident that even for the past cases before the extension of benefit of 75%, abatement to GTA services unconditionally (by notification No. 13/2008, dated 1.3.2008), the benefit of such abatement will be available to the appellant without requirement of any specific endorsement on every consignment note, but merely on general declaration from GTA. In the instant case, from the facts it is seen that the appellants have obtained such undertaking letters from concerned transporters. This being so, the confirmation of demand is in contradiction to the clarifications of CBEC themselves vide circular dated 21.08.2008. Demand set aside - Decided in favor of assessee. 2018 (2) TMI 1250 Application for Settlement Commission - Eligibility to accept the Settlement Application - Development and Supply of Content Services - demand of service tax on various grounds. Held that: - the Bench observes that the case is not one that can be settled in this Forum in view of rival claims, leading to total divergence on facts and on law, which are essential for settling this case. The Bench observes that the issue of analysing the facts, interpretation of legal provisions and consequently determining the tax liability or otherwise of services merely on the basis of claims made by the applicant vis-a-vis the counter claims made by the department cannot be decided in this forum as in an Adjudication proceeding. The Bench, by virtue of the powers vested in it in terms of Section 32L of the Central Excise Act, 1944, made applicable to Service Tax matters under Section 83 of the Finance Act, 1994 rejects the case and sends the case back to the adjudicating authority for adjudication in accordance with the provisions of the law. 2018 (2) TMI 1249 Construction Service other than residential complex, including Commercial/ industrial buildings or civil structures - the applicant had filed ST-3 Returns for Construction service, but the Service Tax was paid for Works Contract Service - N/N. 30/2012-S.T., dated 20-6-2012 read with Rule 2(d) of the Service Tax Rules, 1994 - reverse charge mechanism - demand of interest and penalty. Held that: - Even though initially a portion of the tax was wrongly paid by the Service recipient, instead of the Service provider, i.e. the applicant, and even accepting that the wrong payment had happened by mistaken understanding of the legal position, the fact remains that Service Tax was short paid by the Service provider vis-ä-vis the value determined by them under Section 67 of the Finance Act, 1994. It is also an admitted fact that the applicant had raised bill on the Service recipient charging 100% of the applicable rate of Service Tax. Having charged Service Tax at 100% and paying only 50% of the tax to the Government clearly establishes short payment by the Service provider, attracting interest. It is only a case of excess payment of tax by a different assessee, dealt according to the provisions of law governing refund/ adjustment and it cannot be linked with the case on hand. Hence, the Bench holds that interest is chargeable from the date on which the Service Tax became payable by the applicant, as alleged in the show cause notice and as contended by the jurisdictional Commissioner. The Bench, thus, settles the Service Tax liability and interest liability at 81,59,255/- and 14,61,006/respectively. Penalty - Held that: - This is a case of short payment of Service Tax. Though the sequence of events suggest that the short payment had occurred out of mistaken understanding of the legal position by the Service recipient, the applicant had not disclosed the above facts of short payment till the unit was audited by the officers of the Department. Nevertheless, the applicant had paid short of the appropriate Service Tax and the short payment had come to the notice only on verification by the Audit. The applicant has not suo moto informed the position to the Department - Considering the fact that misunderstanding of the provisions of Notification had led to the short payment of Service Tax and the applicant had made good the short payment on being pointed out, the applicant is entitled to partial waiver of penalty, which this Bench is inclined to consider. Hence, the Bench grants partial waiver from penalty to the applicant. The Bench considers it a fit case for grant of immunity from prosecution to the applicant - The immunities are granted in terms of Section 32K of the Central Excise Act, 1944, as made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994. If the applicant fails to pay the sum ordered as above, the immunity granted shall stand withdrawn. Appeal disposed off. 2018 (2) TMI 1248 Application for settlement u/s 32 of the CEA 1944 - security agency and manpower recruiting agency service - It is the case of the petitioner that on account of prevailing fluid situation about applicability of the service tax to security service agency, the service tax was not paid for the particular disputed period. However, after the visit by the officers, the service tax was substantially paid. Held that: - The order of the Settlement Commission is passed on three findings. Firstly, the Settlement Commission was not convinced with the explanation offered by the petitioner regarding the circumstances for not filing the returns referred to in sub-clause-(a) to proviso to Section 32E(1), secondly, impliedly, the petitioners have not made true and full disclosure and thirdly, that the case was pending for decision before the CESTAT in an appeal filed by the Revenue. Upon receipt of the application under Section 32E, the Settlement Commission is required to issue notice within seven days on receipt of such application, calling upon such applicant to explain in writing why the application made for settlement should be allowed to be proceeded with - in connection with the hearing, a communication dated 19.12.2014 came to be issued, informing the petitioners about date of hearing on 08.01.2015. In-between, there does not appear to be any communication with regard to the application before the Settlement Commission. The affidavit in reply on behalf of the Department also does not indicate any proceedings in-between. With regard to the ground regarding pending appeal before the CESTAT, it would be pertinent to mention that the so called pending proceeding referred to by the Settlement Commission pertains to coercive action initiated under Section 87 of the Finance Act, 1994 freezing five bank accounts of the petitioners. The appeal of the petitioners came to be allowed by the Commissioner (Appeals) by its order dated 23.12.2013, against which the Department has preferred appeal before the CESTAT. In the opinion of this Court, such proceeding, for the purpose of this case, cannot be considered as a restriction under 3rd proviso to Section 32E(1) to entertain the application for settlement. Admittedly the petitioner had not paid the full tax on admitted liability. Settlement Commissioner was therefore, correct in not entertaining the application for settlement on this ground. The statute requires that along with the application, the applicant must deposit the entire tax on admitted liability - petition dismissed. 2018 (2) TMI 1247 Renting of immovable property Service - Nakki Lake which was let out for boating and balloon rides etc., skating rink, let out for skating and certain shops let out for commercial purposes - Held that: - Regarding the consideration received by the appellant from the contractors for using the Nakki Lake and the skating rink area, we note that these two will fall under the excluded category of land used for “entertainment”. Admittedly, both these properties in the form of land were used for admitting public for general amusement - in the absence of any statutory definition. Boat/balloon ride on the lake, skating in the skating rink will fall under the overall ambit of entertainment - tax liability do not sustain. Rental income from commercial shops - Held that: - based on the facts submitted by the appellant and also considering the status of the appellant as a local Government Authority, we hold that no malafide can be attributed to them for non-payment of tax in time - while the appellant is liable to pay service tax on letting out the commercial properties like shops etc., the same shall be restricted to normal period of demand with no penalties. Appeal allowed in part. 2018 (2) TMI 1233 VCES Scheme - extended period of limitation - penalty u/s 78 - penalty u/s 77 (2) for non registration - penalty u/s 70 for late fees. Held that: - as regards extended period, in this case, the SCN has been issued on 24.12. 2014 for the period 01.04.2009 to December 2012 - Admittedly the period from 01.04.2009 to 30.09.2009 is beyond the extended period of limitation, therefore, the demand of service tax for the period 01.04.2009 to 30.09.2009 is set-aside as time barred - penalty also to be reduced to that extent. Penalty u/s 78 - Held that: - Admittedly the appellant has filed declaration on VCES Scheme, 2013 wherein the appellant has declared a sum of 1,43,685/-. The said amount is also found in the demands as per the SCN, therefore, the said amount is required to be reduced from the total demand and the penalty is also modify, therefore, penalty u/s 78 of the FA, 1994 is reduced - Penalty under Section 78 of the Finance Act, 1994 is confirmed equivalent to reduced service tax demand. Penalty u/s 77 (2) and 70 of the Act - Held that: - Admittedly when the appellant was not registered with the service tax department, the penalty has been imposed if the said penalty has been imposed, therefore, no penalty for the less payment of service tax cannot be imposed on the appellant under Section 77 (2) of the Finance Act, 1994 - penalty imposed under Section 77 (2) is set-aside. Appeal allowed in part. Central Excise 2018 (2) TMI 1246 Refund of duty paid - refund claim was rejected by the authorities below on the ground that this Tribunal has considered the issue of imposition of penalty and observed that confirmation of the demand along with interest is to be appropriated in terms of Section 11A (2B) of the Act - Held that: - the amount paid during the course of investigation by the appellant along with interest has been appropriated by this Tribunal. In that circumstances, the refund claims are not maintainable. Therefore, the authorities below has rightly rejected the refund claims of the appellant - appeal dismissed - decided against appellant. 2018 (2) TMI 1245 CENVAT credit - denial on the ground that M/s Sulabh Impex Incorporation has not supplied the goods to the appellant - Held that: - in this case, no investigation was conducted at the end of the appellant to verify the stocks. Moreover, Revenue failed to establish the fact that from where the raw material were purchased by the appellant if the goods in question has not been received by the appellant. Further, the appellant was due diligent while receiving the goods as there was no discrepancy in the invoice and the same has not been alleged by the Revenue. During the course of investigation, the appellant themselves has made a statement that they have received the goods and same has been used in manufacture of final product. Thereafter, no further investigation was conducted by the Revenue to establish the fact the appellant has not received the goods. In that circumstances, benefit of doubt goes in favour of the appellant. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1244 Demand of interest - extended period of limitation - Held that: - the appellant has reversed the Cenvat credit on 2.9.2011 on pointing out by the Audit team. At the time of reversal of Cenvat credit, the appellant was not asked to pay interest. Later on, the SCN has been issued by invoking the extended period of limitation, the same is barred by limitation as held by the Hon’ble Punjab & Haryana High Court in the case of Neel Metal Products Ltd. [2014 (11) TMI 497 - PUNJAB AND HARYANA HIGH COURT] - the show cause notice is barred by limitation qua demand of interest from the appellant - appeal allowed - decided in favor of appellant. 2018 (2) TMI 1243 CENVAT credit - It appeared to the Department that since the capital goods were not installed in the premises of the assessee but in the premises of HLIPL which had separate Central Excise Registration, availment of credit thereof by the assessee was not in order - Held that: - for availing credit of capital goods the conditionalities of Rule 2 (a) of CCR 2004, will require to be satisfied interalia that goods should be used in the factory of manufacture of final products - From the facts on record, it appears that the assessee has availed credit under cover of invoice dated 01.11.2008, which was around five months prior to the date of the said merger. However, at the same time if the assessee had not taken the credit on or around 01.11.2008, but only on or after 01.04.2009, the availment of credit would not have excited any controversy. In our opinion, therefore assessee s right to avail the credit on the said capital goods is very much available w.e.f. 01.04.2009 and the availment of credit prior to that date does not extinguish such eligibility - the availment of Cenvat credit by the assessee cannot be disturbed, however, the assessee will require to discharge interest liability at applicable rates, for the period 01.11.2008 to 01.04.2009. CENVAT credit - the importation of these goods have been made under project imports for which specific Chapter Heading 98.01 exists in the Customs Tariff - Held that: - Evidently, there is no corresponding entry in the Central Excise Tariff. Hence, for purposes of charging additional duty of customs (CVD) the classification of those goods under CETH will be relevant at the time of import. Thus for a project import under CTH 98.01, the capital goods involved in the import will be necessarily classified under different CETH headings for CVD purposes. Keeping in mind this scenario, legislature has specifically inserted an Explanation to Rule 3 (1) of the Rules, which clarifies that a manufacturer or producer of final products shall be allowed Cenvat credit of additional duty of all goods falling under CTH 98.01 - The takeaway from this Explanation is that once the goods are imported under CTH 98.01, irrespective of where the goods would be classifiable under CETH, they will become eligible for availment of the CVD portion as capital goods credit - credit rightly allowed. Appeal allowed in part. 2018 (2) TMI 1242 Jurisdiction - power to issue SCN - whether the Additional Director General (DGCEI), New Delhi was the competent Authority to issue SCN? - Held that: - similar issue decided in the case of M/s Shri Mahindera Dugar, Shri Mahender Dugar And Photocoping Services Versus CC, New Delhi (Import & General) [2017 (6) TMI 662 - CESTAT NEW DELHI], where it was held that even the new inserted section 28(11) does not empower either the officers of DRI or the DGCEI to issue the SCN for the period prior to 8.4.11. Matters remanded to the Original Authority for a fresh decision - Appeal allowed by way of remand. 2018 (2) TMI 1241 CENVAT credit of CVD - re-import of goods for repair - manufacture or not? - Held that: - the goods have been re-imported upon return of the same by the foreign buyer - Though the list of processes is elaborate, it cannot be said that the processes have changed the goods substantially and anything new has come into existence. The re-packing of the same will not alter the nature of the goods - the re-imported goods have been subjected to only various processes of repair and refurbishment and same cannot be considered as processes of manufacture as per Section 2 (f) of the Central Excise Act, 1944. The appellant is not required to pay the excise duty when such re-processed goods are cleared but are required to reverse the Cenvat credit availed at the time of re-entry of the goods back into the factory. Appeal dismissed - decided against appellant. 2018 (2) TMI 1240 Valuation - includibility - subsidy - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the CEA 1944 - Held that: - it is evident that for the initial period, the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan, payment of VAT using such Challan are considered legal payments of tax. In view of the above, Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. The Tribunal in the Welspun Corporation Ltd. [2017 (5) TMI 177 - CESTAT MUMBAI] case has concluded that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1239 Benefit of N/N. 5/2006 (Sl. No. 5) dated 01/03/2006 - Footwear - denial of benefit of notification on the ground that the appellant had manufactured and cleared footwear without embossing the MRP on such footwear - Held that: - The condition specified for the exemption to footwear of MRP less than 250/- per pair is that the footwear needs to be sold with the MRP embossed. During investigation, it stands established that the goods manufactured and cleared were never embedded with the MRP. In fact no embossing machine was found in the factory during the course of search. The argument raised by the appellant is that this condition cannot be viewed as a substantial condition for the benefit of the notification. She has argued that the substantial condition is that the exemption is applicable only to footwear which are of MRP less than 250/- per pair. The market enquiry conducted by Revenue has, in fact confirmed, that the MRP of the footwear manufactured and sold by the appellant is never more than 250/- per pair - the substantial condition of the notification is satisfied by the appellant and hence the benefit should be extended to them. The exemption in the present case is required to be extended to the appellant, in as much as the substantial condition of MRP of the footwear has been satisfied even though the condition regarding the indelibly embossing the MRP has not been satisfied - reliance placed in the case of BOMBAY CHEMICAL PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY [1995 (4) TMI 59 - SUPREME COURT OF INDIA]. Benefit of captive consumption - shoe uppers - Held that: - the appellant has one factory where the shoe uppers have been manufactured which are captively consumed in the other factory in the manufacture of the footwear - once the benefit of exemption is granted to the footwear, the benefit of captive consumption for shoe uppers cannot be extended. Appeal allowed in part. 2018 (2) TMI 1238 CENVAT credit - trading activity - common services used for dutiable goods and trading activity - Held that: - prior to 1.4.2011, the trading activity cannot be considered as an exempted service, therefore, the credit availed on the input service common to manufacture of excisable goods and also trading activity cannot be denied - appeal allowed - decided in favor of appellant. 2018 (2) TMI 1236 CENVAT credit - input services beyond port of export - whether the Appellant are eligible to cenvat credit of the service tax paid on ocean freight and airfreight charges? - Held that: - The Hon’ble Gujarat High Court in the Dynamic Industries Ltd.’ case [2014 (8) TMI 713 - GUJARAT HIGH COURT] has observed while interpreting the scope of ‘input service’ prescribed under Rule 2(l) of the Cenvat Credit Rules, 2004 that in the case of export goods, the ‘place of export’, that is sea port/air port would be considered as the ‘place of removal’. Service tax paid on ocean freight and airfreight thus not admissible to credit - appeal dismissed - decided against appellant. 2018 (2) TMI 1235 Refund claim - rejection on the ground of time limitation - Section 11B of CEA 1944 - Held that: - the amount of duty was paid on 28.12.2012 as the Appellant could not produce the proof of export in compliance of the condition of N/N. 42/2001-CE(NT). Later, even though the proof of export was submitted in April 2013, but the refund claim was filed on 14.4.2014, after one year from the date of payment of duty, hence the refund is barred by limitation - appeal dismissed - decided against appellant. 2018 (2) TMI 1234 CENVAT credit - by-product - Rule 6(3) of CCR 2004 - Held that: - the waste/by-product namely, wooden roller, wooden baton and firewood arise during the course of cutting of timber logs, cannot be subjected to Rule 6(3) of CCR 2004 - Reliance placed in the case of C.C.E. Vs. Anil Products [2013 (10) TMI 798 - GUJARAT HIGH COURT] - Appeal dismissed - decided against Revenue. 2018 (2) TMI 1232 CENVAT credit - input services - civil construction services - Alleging that after 1.4.2011, setting up of new installation not eligible to credit, SCN was issued on 21.8.2015 for recovery of the credit of 4,09,213/- with interest and proposal for penalty - Held that: - There is no dispute about the fact that the Appellant has used construction service in setting up windmill which is inadmissible to credit after 1.4.2011. However, on being pointed out, they had reversed the credit with interest - penalty not justified - appeal allowed in part. 2018 (2) TMI 1231 Valuation - Interpretation of Statute - definition of related person under section 4 of Central Excise Act, 1944, read with definition of "interconnected undertakings" in Section 2(g) of MRTP Act, 1969 - Valuation - related party transaction - Department harboured the view that appellant and the two firms are related to each other and having mutual interest; that appellants adopted lower prices to these two firms compared to that of other independent customers; that appellants were collecting certain amounts as twisting & straitening charges from these two firms by raising debit notes which are not being included in the assessable value. Whether the shareholding of "close relatives" of the partners can be added to the shareholding of the partners themselves for the purposes of adjudging whether the partners of each firm hold directly or indirectly, not less than 50% of the share of another entity which is a body corporate? Held that: - At the time of introduction of new section 4, the CBEC thought it proper to issue a circular No. 354/81/2000-TRU dated 30.06.2000 which sought to explain the changes brought about. In para 5 of the said circular, CBEC clarified that new section 4 essentially seeks to accept different transaction values which may be charged by the assessee to different customers for assessment purposes, so long as these are based upon purely commercial consideration, where buyer and seller have no relationship and price is the sale consideration for same - Para 24 of the circular clarifies that a new provision has been made in the valuation rules and even if the assessee and the buyer are inter-connected undertakings, the transaction value will be registered only when they are related in terms of clause (ii), (iii), or (iv) of sub section 4(3)(b) or the buyer is a holding company or a subsidiary company of the assessee. In para 25, it was further clarified that notwithstanding the change in the definition of related personin the new section 4 for practical applications, its scope has been restricted and but for small variation, it would not be much different than that covered under the old section 4 definition - post 01.07.2000, assessee and the buyer shall be deemed to be relatedas per section 4(3)(b) of the Act. For the purpose of section 4 of the Central Excise Act, persons shall be deemed relatives, if they both in any of the categories listed in sub section 4 (3) (b) thereof. True, one of these categories is when the persons are relatives, where relative shall have the meaning assigned to it under section 2(41) of the Companies Act, 1956. The list of relatives under the provision includes only members of Hindu Undivided Family (HUF), or husband & wife, or, if they fall in the list of 22 categories of relatives given in schedule 1(a) to Section 6 of the Companies Act, 1956. The relationships like brother-in-law, mother-in-law etc. do not find a place in that list. In any case, the department is not seeking to allege that the impugned entities are related on account of their falling within the ambit of 4(3)(b)(ii) namely they are relatives. On the other hand, the department has only sought to charge these entities as being related for the purpose of section 4(3)(b)(i), that they are inter-connected undertakings. Whether the addition of share holding of close relatives by the adjudicating authority is legally correct or not? - Held that: - the answer is resoundingly in the negative. We are unable to find any provision in section 4 of Central Excise Act, 1944 or for that matter, in section 2(g) of MRTP Act, 1969 that allows for such addition of shareholding of close relatives. Secondly the conclusions arrived at by the adjudicating authorities in this regard are against all accepted principles of statutory interpretation. Words in a statute should be interpreted literally and as they stand, and the starting point for interpreting a statue, is the language of the statute itself. When the words of a statute are unambiguous, this first canon is also the last - the attempt of the lower authorities to add the shareholding of the shareholders in Black Gold "related" to the concerned partners is surely a misconceived interpretation of the relevant statutory provision. The combined shareholding of the partners in each firm, who are also shareholders in the body corporate can alone be added up for the purpose of determining whether they cross the 50% shareholding bench mark. As seen above, this is suddenly not the case in respect of the concerned partners of both AS Steel Traders and Sri Vijayalaxmi Steel Traders - M/s Black Gold and the two firms cannot be considered as related persons for the purpose of section 4(3)(b)(i) of Central Excise Act, 1944. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1230 Clandestine Removal - Department has alleged that the assessee has indulged in evasion of central excise duty by purchasing raw materials viz., MS ingots without accounting and utilizing the same in the manufacture and clearance of CTD bars without accounting and without payment of excise duty during the period October, 2004 to 13.06.2006. Held that: - the main edifice of the department's case against the appellants is built on the so called 'advance files' containing the details of charges paid to the labour contractors of loading and unloading - the recovery of such payments made for loading can only become an additional support to main evidences like proof of evidence for transportation of the finished products and evidence of realisation of the value relating to the sale of any alleged clandestinely removed goods. It is very difficult for the department to lay hands on each and every link in the chain of the modus operandi involving clandestine clearances. However, total absence of any evidence or for that matter evidences available on for a limited period, cannot be extrapolated to a presumption that such activity had been on-going for a larger period - the available evidences as capsuled in the annexures to the SCN is limited to a few months only viz. from April, 2006 to June, 2006. Any confirmation of duty liability can only be based only on the evidences which have been relied upon in the annexures to the SCN - The demand will necessarily be restricted to the period for which evidences are available as per in the annexures to the SCN. The matter then needs to be re-adjudicated keeping all these aspects in mind. Penalty u/s 11AC - Held that: - penalty upheld. Appeal allowed by way of remand. 2018 (2) TMI 1229 Refund claim - customer did not honour the enhanced price of the goods charged by them through the supplementary invoices - denial on the ground of unjust enrichment - Held that: - it is not in dispute that the customer of the appellants had not actually paid or had agreed as payable, the additional price component, sought to be enhanced by issue of supplementary invoices. In these circumstances, the appellants are not legally bound to discharge any duty liability on a price component not paid or payable - the duty discharged on the supplementary invoices by the appellants will be eligible for refund, subject to other provisions and conditionalities of section 11B of the Act - refund to be allowed - appeal allowed - decided in favor of appellant. 2018 (2) TMI 1228 Rejection of request of common registration - rejection on the ground that between appellant's existing unit and other unit for which common registration was sought, there is another unit which does not belong to appellant - Held that: - the important factor is that both the units which should belong to one entity and certain criteria such as common work force, sales tax, raw materials, management etc. The fact are not in dispute that most of the factors have been fulfilled by the appellant. There is one plot in between both the premises does not belong to appellant but both the premises are interlinked by pipeline for supply and use of furnace oil by both the units. Separation of both the premises by only one plot is not significance and for this reason the request for common registration should not be rejected. Appeal allowed - decided in favor of appellant. 2018 (2) TMI 1227 CENVAT credit - input services - Brokerage for procuring inputs - bank charges - pest control - job work charges - cab operator - maintenance and repair services in relation to cars - commission paid to domestic and foreign selling agents - legal services - printing service - commission to foreign and domestic agents - Held that: - credit on service tax paid on the input services namely, Broakerage for procuring inputs, bank charges, pest control, job charges, legal services, printing service is admissible to credit - reliance placed in the case of Meghmani Dyes & Intermediates Ltd. vs CCE Ahmedabad [2014 (1) TMI 558 - CESTAT AHMEDABAD]. Service tax paid on rent-a-cab, repair and maintenance in relation to vehicles for the period after 01.04.2011 is not admissible. Regarding, the service tax paid on sales commission service, the order of the Tribunal in the case of Essar Steel India Pvt. Ltd. [2016 (4) TMI 232 - CESTAT AHMEDABAD] has been challenged by the Revenue and the same is on board of the Hon’ble Gujarat High Court. Therefore, this issue is remanded to the adjudicating authority to decide the same on the basis of outcome of the aforesaid pending appeal before the Hon’ble Gujarat High Court. Decided partly in favor of assessee, partly against assessee and part matter on remand. 2018 (2) TMI 1226 Classification of goods - fibreglass casting tapes/splints - appellant’s stand is that the subject goods are classifiable under Chapter heading 9021.90 whereas the department’s stand is that these goods are classifiable under 3004.90 of CETA - Held that: - subject goods are not in the category of orthopaedic appliances, which could find classification under Chapter 9002. The said goods actually are in the category of wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), which are meant for use in medical/surgical purpose. There is no material on record and no acceptable submission also from the appellant to hold that the classification of the subject item be under Chapter 9002 instead of Chapter 30. Appeal dismissed - decided against appellant. 2018 (2) TMI 1225 CENVAT credit - adjustment of the amount recovered - Held that: - it is very clearly emerging that the amount of 22,17,549/- recovered under the instruction of jurisdictional Range Officer, was not adjusted i.e. the same was not adjudicated by the competent authority and the matter had not reached the stage where the Range Superintendent could have recovered it - The action of the Range Superintendent, who recovered the amount which was not adjusted by the competent authority is not as per law - appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2018 (2) TMI 1224 Maintainability of petition - alternative remedy - Principles of natural justice - Held that: - Merely raising a hue and cry about the breach of principles of natural justice does not entitle the petitioner-assessee to invoke the extraordinary Writ jurisdiction of this Court against the orders, which are appealable before the regular Authorities of the Department created under the enactments. The power of these Appellate Authorities with two-tier appeal remedies provided under the KVAT Act, first under Section 62 of the Act before the Joint Commissioner (Appeals) and secondly, before the Karnataka Appellate Tribunal under Section 63 of the Act, which have co-extensive powers, as the Assessing Authority has under the said Act. Even assuming that the petitioner-assessee could not adduce relevant evidence before the Assessing Authority, he still has such opportunity available to him even before the Appellate Authorities. Nothing entitles the petitioner – assessee to invoke the Writ jurisdiction of this Court in these circumstances - petition devoid of merits and is dismissed. 2018 (2) TMI 1223 Concessional rate of tax - purchase of spares for machinery, against Form XVII - case of Revenue is that spares and machineries, intended for repair and reconditioning, are not eligible to be purchased, against Form XVII, under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959, as per the clarification issued by the Commissioner of Commercial Taxes, Chennai K.Dis.Acts Cell-I/13063/2004, dated 14.09.2004 - Whether the disputed turnover is not eligible for concessional rate of tax as provided under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959? - Whether the penalty under Section 23 of the Tamilnadu General Sales Tax Act, 1959 is warranted in this case? Held that: - In the present case, the goods sold fall within the items mentioned in Entry 3 of the Eighth schedule. Therefore, the assessee has satisfied the first condition. In respect of the second condition, ie., use in the factory site within the State, there is no dispute that the same were used in the factory site, within the State. Hence, the second condition is also satisfied. The third condition is that the goods should be used in manufacture. Use may be direct or indirect, in the process of manufacture. Plant and machinery are used for the purpose of manufacturing vanaspathi and bakery shortening. Since the goods are installed and used in the factory site, the respondent-dealer is entitled to the concessional rate of tax at 3%. Therefore, the Tribunal has rightly held that the disputed turnovers are eligible for concessional rate of tax, provided under Section 3(5) of the Tamilnadu General Sales Tax Act, 1959. The assessee has satisfied all the conditions enumerated and Section 3(5) of the Act and hence, they are entitled to the concessional rate of tax under Section 3(5) of the Act - Section 3(5) of the Act is a beneficial provision. It provides for concession in tax to encourage industrial activity. It is well settled principle that a taxing provision, granting concessional and incentives for promoting growth and development, should be construed liberally. Revision dismissed - decided against Revenue. Indian Laws 2018 (2) TMI 1266 Offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - sentence awarded to appellant - Held that: - it is not possible to interfere with the concurrent finding of fact regarding the finding of guilt recorded against the appellant. Thus, no interference is warranted against the order of conviction. Interest of justice would be subserved if the order regarding simple imprisonment of three months is modified and in lieu thereof, additional compensation amount of 1,00,000/-, already deposited by the appellant before the Trial Court, is directed to be made over to respondent No.2 - In other words, respondent No.2 is free to withdraw the additional compensation amount of 1,00,000/- already deposited by the appellant before the Trial Court. This amount be paid to respondent No.2 subject to verification of his identity. Appeal allowed in part. 2018 (2) TMI 1265 Dishonor of cheque - Offence punishable under Section 138 of the Negotiable Instruments Act - it is the allegation of the complainant in the complaint itself that accused nos. 2 and 3 on behalf of accused no.1 Company have signed the cheque. Therefore, rest of the accused persons are not responsible for dishonor of the cheque, since they have not signed the cheque. therefore, they cannot be prosecuted. Held that: - In the present case, the cheque is issued on behalf of the Company by accused no.1 signed by accused nos. 2 and 3 and rest of the accused persons are the Directors having knowledge of the same and that can be gathered from the contents of the complaint itself, wherein it is specifically contended that the cheque dated 1.10.2016 was given to the complainant after accused nos. 2 and 3 signed on behalf of accused no.1 and accused nos. 2 to 8 gave assurance that the cheque will be honoured on the due date and accordingly the complainant had accepted the same. So, accused nos. 2 to 8 are acting on behalf of accused no.1 Company and they are directly connected with the daytoday affairs of the Company. Therefore, they are liable for the prosecution as per the provisions of Section 141 of the Negotiable Instruments Act. It appears that if offence is committed by the Company, then every person who, at the time of offence was incharge and was responsible for the conduct of business of the Company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly - when all the Directors are connected with the business of the Company, it will make no difference if the cheque is issued by one or all the Directors, because the cheque was issued for and on behalf of the Company. It was also alleged that the learned Magistrate has issued process without complying with the mandatory provisions of Section 202 of the Criminal Procedure Code - Held that: - it appears that the object of Section 200 of the Criminal Procedure Code is to test whether the complainant makes out a sufficient ground for the purpose of issuing process. Amended Section 202 (1) of the Criminal Procedure Code makes it obligatory upon the learned Magistrate that before summoning the accused residing beyond the jurisdiction of the Court, he shall enquire the case himself or direct the investigation to be made by the police officer or such other person as he thinks fit for finding out whether or not there is sufficient ground to proceed against the accused. Thus, it appears that the object of such inquiry is to ensure that the innocent persons residing beyond the jurisdiction of the Magistrate are not harassed by unscrupulous persons by filing false complaints. Therefore, it casts a duty upon the Magistrate to arrive at prima facie satisfaction whether or not there is sufficient ground to proceed against the accused residing beyond his jurisdiction. The learned Magistrate is not under obligation to direct the investigation to be made by the police officer. If he himself is satisfied that there is prima facie case to issue process, then on its satisfaction, the learned Magistrate can issue process directly - In the present case, the complainant has submitted his affidavit in the form of verification of the complaint before the Court and on perusal of the contents of verified affidavit of the complainant and after satisfaction the learned Trial Court has issued process - there is no illegality with the order passed by the learned Magistrate. Petition dismissed.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter February 21, 2018

TMI SMS

News

1. Cabinet approves New Bill to ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018

2. RBI Reference Rate for US $

Highlights / Catch Notes

Income Tax

Assessing Officer Can Re-examine If Initial Disclosures Are Found Prima Facie Untrue Under Reopening of Assessment Rules.

High Court Clarifies Section 206AA: DTAA Tax Rates Override 20% TDS on Non-Residents Without PAN.

Court Rules Licensee Not Owner u/s 22; Income Taxed as "Other Sources" Instead of House Property.

Assessee Cannot Claim Depreciation on Land and Building Improvements Due to Non-Qualification Under Tax Laws.

Assessee Can Deduct Unabsorbed Depreciation for Profit Calculation u/s 115JB of Income Tax Act.

Customs

Circular Allows Recovery Beyond Deposited Amount; "Shall" in Clause 4.2 Interpreted as "May" for Flexibility.

Imported Under Pads Reclassified: Not Diapers, But Other Sanitary Articles Under Chapter Sub-Heading 48184090.

Service Tax

High Court Upholds Ban on Using Education Cess Credits for Telecom Service Tax Payments, Citing Articles 14, 19(1)(g), 265, 300A.

GTA Services Tax Exemption Does Not Cover Transport of Cut Wood, Not Classified as "Agricultural Produce.

Target Incentives Exempt from Service Tax Under Business Auxiliary Services: Clarification on Tax Liability.

Electricity Charges Excluded from Assessable Value for Service Tax on Rental Properties.

Hydroelectric Dam Construction Exempt from Commercial Service Tax; Not Classified as Commercial or Industrial Construction.

Court Rules Service Tax on Naphtha Throughput Charges Unjustifiable Without Excise Duty Liability.

Settlement Commission Can't Resolve Service Tax Issues; Requires Adjudication for Fact Analysis and Legal Interpretation.

Settlement Commission Rejects Application Due to Unpaid Service Tax on Admitted Liability.

Immovable property rentals for public amusement like boat rides and skating exempt from service tax due to undefined terms.

Central Excise

CENVAT Credit Allowed for Goods Imported Under CTH 98.01 as Capital Goods, Including CVD Portion.

Appellant Denied CENVAT Credit on Service Tax for Ocean and Airfreight Charges Beyond Export Port.

Court Favors Assessee in Defining "Related Person" for Excise Duty u/s 4, Central Excise Act, 1944.

Customer Refund Claim Eligible Due to Supplementary Invoice Duty Payment; Subject to Section 11B Compliance Conditions.

Fibreglass Casting Tapes and Splints Classified as Medical Articles under CETA Code 3004.90 for Excise Purposes.

VAT

Section 3(5) of TNGST 1959 Act: Tax Concessions to Promote Industrial Growth Should Be Interpreted Liberally.

Case Laws:

GST

Income Tax

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Corporate Laws

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CST, VAT & Sales Tax

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TMI Tax Updates - e-Newsletter
February 21, 2018