Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 8, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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GOODS AND SERVICE TAX CONCEPT & STATUS - AS ON 1st FEBRUARY, 2019
Income Tax
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Disallowance of remuneration paid to working partners - instead of specified remuneration in the partnership deed, it is linked to provisions of section 40(b)(v) income tax Act, 1961 - deduction allowed
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Allowable deduction u/s 37 - reinsurance premium paid to non-resident - while restoring the matter before ITAT, HC directed that, the assessee and the Revenue are not entitled to place any fresh material before the Tribunal so as to enable the Tribunal to take a decision as expeditiously as possible.
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Allowable deduction u/s 37 - ITAT observed that reinsurance payments to non-residents are prohibited by law and therefore hit by Explanation 1 to section 37 of the Act? - Matter restored before ITAT
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Application for settlement of cases - scope of the term ‘related person’ in the ‘specified person’ - even the provisions of Section 13 of the General Clauses Act to read singular as plural for the term ‘person’ used under clause (B) of Explanation, cannot be construed in the manner, as has been canvassed.
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Bad debts - Advance given to Subsidiary Company for Job work - The subsidiary company was in absolute financial stringency and there was no possibility of any recovery from that company. - claim of bad debts allowed.
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Monetary limits for filing/ withdrawal of Wealth Tax appeals by the Department before ITAT, HCs and SLPs/appeals before SC through extending the scope of Circular 3 of 2018 -Measures for reducing litigation
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Nature of expenditure - revenue or capital - construction, equipping, operation and maintenance of two berths on Build, Operate and Transport (BOT) basis in the Vaizag Port - there was no enduring benefit obtained by the assessee. It broke down when the Government of India cancelled the tender. - Claim of expenditure allowed.
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Disallowance of deduction u/s 80-IC - Though the findings of facts by the AO were reversed by the CIT(A), and in turn were set aside by the ITAT, that ipso facto does not attract the jurisdiction of this Court unless the reasoning or the approach of the ITAT is so unreasonable or manifestly irrational.
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Rectification of mistake - impact of subsequent decision passed by the High court after the order of assessment - rectification under Section 154 of the Act of 1961 is permissible in order to bring the order of assessment in terms of an authoritative pronouncement of the Court.
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Validity of reopening of assessment - notice against non existent entity / amalgamated company - Notices issued.
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Mandation of linkage of PAN with Aadhar - Permission to file Income Tax returns (ITR) without complying with the condition of providing Aadhar Card registration number or Aadhar Card Enrollment number - permission denied.
Customs
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Customs Brokers Licensing (Amendment) Regulations, 2019
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EPCG Scheme - non-installation of capital goods at the place indicated - The objectives of the notification, and indeed of the export promotion scheme in the Foreign Trade Policy, should prevail over technical irregularities that were repaired in the fullness of time
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Valuation of imported goods - Hot Rolled Coils (HR Coils) - Merely because the assessee failed to submit any payment certificate or Bill of Exchange, the Assessing officer rejected the value declared by the assessee - HR Coil and HR Steel Plates cannot be said to be similar or identical goods - The Adjudicating Authority has erred in rejecting the declared price/transaction value
Indian Laws
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Sixth Bi-monthly Monetary Policy Statement, 2018-19 Resolution of the Monetary Policy Committee (MPC) Reserve Bank of India
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Cabinet approves establishment of a unified authority for regulating all financial services in International Financial Services Centres (IFSCs) in India through International Financial Services Centres Authority Bill, 2019
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Cabinet approves Abolition of Institution of Income-Tax Ombudsman and Indirect Tax Ombudsman
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Cabinet approves Proposal for Official Amendments to the Banning of Unregulated Deposit Schemes Bill, 2018
IBC
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Initiation of the process against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default - for same set of debt, claim cannot be filed by same ‘Financial Creditor’ in two separate ‘Corporate Insolvency Resolution Processes’
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Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’.
Service Tax
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Nature of Activity - sale or service? - leasing of generator - service of supply of tangible goods - assessee is registered with VAT department and paying VAT on this transaction - No service tax liability.
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Classification of service - plumbing services to various builders - laying down the pipeline in the building cannot be considered as finishing work, but essential for construction of the building, hence, the benefit of the Notification No. 01/2006-ST dt. 1.3.2006 is admissible to them.
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Levy of penalty u/s 78 - once the taxes have been paid, along with interest, the entire proceedings under the Finance Act, 1994 are concluded.
Central Excise
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Manufacture - marketability - Exemption to specified goods - The Tribunal having misread the entire evidence on record committed manifest error in reversing the order passed by the Commissione - Demand confirmed.
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CENVAT Credit - fictitious invoices - invoices without corresponding procurement of goods described therein - the investigation failed to obtain facts that could have corroborated the statement and sustain it even after the person had expired - Demand set aside.
Case Laws:
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GST
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2019 (2) TMI 330
Amount involved in E-way bill - petitioner has generated e-way bill for more amount and on physical verification the same was found less - contravention of provisions of CGST and SGST 2017 or not - Held that:- The e-way bills have been annexed on page 20-23. The hard copies are not required. There is no inference drawn by the opposite parties that the e-way bills were not correct or they were fake - an officer of not less than the rank of Assistant Commissioner, who is well versed with the facts of the case, may be present before the Court on the date fixed. List on 14.2.2019 as fresh.
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2019 (2) TMI 329
Detention of goods and vehicle - Failure to remit tax and penalty u/s 129 of KGST Act, 2017 - Confiscation u/s 130 of the Act justified or not? - Held that:- We are afraid that the time for raising such a contention has not arisen, since as of now the Department has not proceeded under Section 130. On furnishing the Bank Guarantee for tax and penalty as provided under Rule 141 of the Central Goods and Services Tax Rules, 2017, and simple bond without sureties for the value of the goods, the goods and the vehicle shall be released expeditiously Appeal disposed off.
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2019 (2) TMI 328
Vires of Articles 246A of the Constitution of India - Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 - clauses (a), (b), (c), (d) and (e) of Sub Section 2 of Section 174 of the Kerala State Goods and Services Act 2017 - Held that:- The issues stand squarely covered against the petitioner by judgment in the matter of SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. [2019 (2) TMI 300 - KERALA HIGH COURT] and connected cases - petition dismissed.
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2019 (2) TMI 327
Vires of Articles 246A of the Constitution of India - Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 - clauses (a), (b), (c), (d) and (e) of Sub Section 2 of Section 174 of the Kerala State Goods and Services Act 2017 - Held that:- The issues stand squarely covered against the petitioner by judgment in the matter of SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. [2019 (2) TMI 300 - KERALA HIGH COURT] and connected cases and connected cases - petition dismissed.
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Income Tax
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2019 (2) TMI 337
Reopening of assessment - reasons to believe - Held that:- In a given case, the situation may arise where even if the Assessing Officer has examined an issue during the assessment, he may receive additional information and material from outside sources prima facie suggesting that the stand of the assessee and the conclusion of the Assessing Officer on the basis of records of the assessment, were incorrect. In such situation, reopening of assessment may still be permitted. In the present case, however, no such material outside of the assessment records is shown to have been brought to the notice of the Assessing Officer. He only referred to the order of the assessment passed by the Assessing Officer of Morarjee Textiles Ltd. Such assessment was based on the documents which were already part of the assessment in case of the present petitioner The opinion formed by the AO of Morarjee Textiles can be seen to be another view point which may also be valid. However, the formation of the opinion by another AO on the same set of documents and materials cannot give justifiable ground to the Assessing Officer of the present assessee to contend that there is additional information or material at his command permitting him to have a relook at the situation. In plain terms, what the AO in the present case is attempting to do is to review his own conclusions formed during the original assessment after full examination, with the aid of not new or additional materials but on the basis of the conclusions of another AO; which are based on the same materials available during the original assessment before him. Situation thus, in the present case is that the AO during the assessment examined the transaction in question on the strength of certain documents and accepted the capital gain offered by the assessee arising out of such transaction. Another Assessing Officer in the case of Morarjee Textiles examined the same set of documents and formed a different opinion. When this was placed before him, the Assessing Officer of the petitioner wishes to change his view and adopt the view of the Assessing Officer of Morarjee Textiles, which is wholly impermissible. The concept of change of opinion not permitting reopening of assessment once an issue has been examined during the original scrutiny assessment is all too well established requiring reference to any judgments. In this case also a query was raised during the regular assessment proceedings and it was responded to by the assessee. This non consideration of the same in the assessment order is no evidence of the Assessing Officer not being satisfied with the issue raised. This was established on the basis of subsequent information received. This Court held that in such a situation, reopening of assessment even beyond the period of four years from the end of relevant assessment year would be permissible. In view of the detail discussion, on the facts on record, both the decisions cited by the learned counsel for the Revenue would have no applicability. - Decided in favour of assessee
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2019 (2) TMI 336
Application for settlement of cases - scope of the term related person in the specified person - The Director of the petitioner-Company is having 100% interest in the business or profession of the specified person - Validity of application filed by the petitioner-Company under Section 245C(1) as it has not fulfilled the conditions prescribed under Section 245C(1) - Held that:- The bare perusal of definition of substantial interest, as per clause (a) of clause (vi) of Explanation to Section 245(1) of the Act, 1961 clearly reveals that a share holder should carry not less than 20% of the voting power of a Company. Clubbing of share holding by different share holders to make it 20% of having substantial interest, is not permissible under the law. The submission of the petitioner that the relevant provisions need to be suitably read down to hold the petitioner-Company being covered under the expression, is wholly without substance. This court also does not agree to the submission of learned counsel for the petitioner that alternatively, the case of the petitioner-Company will fall under clause (vi)(A) of Explanation of clause (1)(a) of Section 245C as the petitioner- Company is covered by the expression of any person who carries on a business or profession in which the specified person i.e. Shri Ram Jashandas Bhatia holds substantial interest, this court finds that the submission is wholly without any substance and even the provisions of Section 13 of the General Clauses Act to read singular as plural for the term person used under clause (B) of Explanation, cannot be construed in the manner, as has been canvassed. This court finds that the Delhi High Court in the case of Rockland Hotels Ltd. Vs. Income Tax Settlement Commission, Principal Bench and Ors. [2015 (10) TMI 1904 - DELHI HIGH COURT] and other connected writ petitions has interpreted the entire Section 245C of the Act, 1961 dealing with the applications for settlement of the cases. Order of settlement commission sustained - Decided against the assessee.
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2019 (2) TMI 335
Allowable deduction u/s 37 - ITAT observed that reinsurance payments to non-residents are prohibited by law and therefore hit by Explanation 1 to section 37 of the Act? - TDS liability on reinsurance premium paid to non-resident - Held that:- The words “other insurer” occurring in sub-Section 7 of Section 101A of the Insurance Act cannot be treated as a “pronoun” or a “noun” and should be read as a “verb”. This is more so because, there is no separate definition provided for “other insurer” and considering the scheme of Section 101A of the Insurance Act, “other insurer” should mean the insurer, who is outside India and not a person in terms of the definition under Section 2(9) of the Act. We are of the clear view that the Tribunal erred in coming to a conclusion that it is not the intention of the Parliament to authorize an Indian insurer to have re-insurance outside the country ignoring the provisions of Insurance Act referred above. The Tribunal had no jurisdiction to declare any provisions of the regulations to be inconsistent with the provisions of the Insurance Act. This was wholly outside the purview of the Tribunal. Tribunal clearly exceeded its jurisdiction in stating that the assessee have engaged in a transaction, which is prohibited by law and therefore, not entitled for deduction under Section 37. This has never been the case of the Revenue either before the Assessing Officer or before the CIT(A) or before the Tribunal, when they filed appeals challenging that portion of the order passed by the CIT(A), which was against the Revenue. Tribunal while upholding the order of the AO did not assign any independent reasons. The discussion in the impugned order relates to the validity of re-insurance business outside India done by an Indian insurer. Tribunal did not consider the correctness of the order passed by the AO or that of the CIT(A). Tribunal could not have held that the Assessing Officer rightly disallowed the re-insurance premium under Section 40(a)(i). This finding is not supported with any reasons. Therefore, the Tribunal misdirected itself, exceeded the scope of remand as ordered by the Division Bench and ventured into a jurisdiction, which is wholly prohibited in the light of the plain language of Section 254(1) of the Act. We are of the clear view that the order passed by the Tribunal calls for interference. Accordingly, the appeals, filed by the assessee are allowed and the substantial questions of law framed are answered in favour of the assessee. The matter stands remanded to the Tribunal to take a decision on the following points:- (i) Whether the Assessing Officer was right in disallowing the re-insurance premium under Section 40(a)(i) of the Act; (ii) Whether the CIT(A) was right in rejecting partially the appeal filed by the assessee; and (iii) Whether the CIT(A) was justified in restricting the claim of the assessee to 15% instead of confirming the order passed by the Assessing Officer.
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2019 (2) TMI 334
Validity of assessment u/s 153A/153C - additions to income - as per revenue none of the provisions confine the enquiry of the AO to evaluating incriminating materials - Held that:- As decided in case in case of Pro.CIT vs. Ram Avtar Verma [2017 (2) TMI 1212 - DELHI HIGH COURT] we could not found that there is any incriminating material referred by the AO which is found during the course of search for making these additions. The non-obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the pre-existing provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the AO during block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in Section 153A. But for such a non-obstante clause, the Revenue could possibly have faced hurdles in regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under Sections 153A/153C. - Decided against revenue
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2019 (2) TMI 333
Disallowance of remuneration paid to working partners - authorization of remuneration paid to working partners as per the Partnership deed - Scope of Section 40(b)(v) - instead of specified remuneration, it is linked to provisions of income tax Act, 1961 - Held that:- A reading of section 40(b)(v) clearly shows that the amount of remuneration which does not exceed the amount given in the Income-tax Act is deductible. In the present case, the partnership deed provides that the remuneration will be as per the provisions of the Income-tax Act. It clearly means that the remuneration payable to the partners shall be quantified as per the provisions of the Income-tax Act and shall not exceed the maximum remuneration provided. It is not in dispute that the partners were paid remuneration which was less than the maximum provided by the Income-tax Act. There is no doubt with regard to the payment of remuneration and in fact account books of the assessee firm have been accepted as correct. There is no doubt that the partners are working partners and remuneration has been paid to such working partners. Therefore, the Circular has to read along with section 40(b)(v) and has to be made subject to provisions of section 40(b)(v) of the I.T.Act. Section 40(b)(v) does not lay down any condition of fixing the remuneration or the method of remuneration in the partnership deed. All that the section provides is that in case the payment of remuneration made to any working partner is in accordance with the terms of the partnership deed and does not exceed the aggregate amount as laid down in the relevant provisions of the Income-tax Act. Remuneration paid to the working partners has to be allowed as deduction in the hands of the assessee-firm. - Decided in favour of assessee
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2019 (2) TMI 332
Addition u/s 145A - assessee is liable to include the amount of excise and VAT while valuing the closing stock as on 31.03.2012 as per the provision of Section 145A? - AO disregarded the contention of the assessee and added the amount of Excise and VAT in the closing stock - Held that:- In the own case of the assessee in A.Y. 2010-11 decided the issue in favor of the assessee Hon’ble Jurisdictional High Court in the case of ACIT Vs. Narmada Chematur Petrochemicals Ltd. [2010 (8) TMI 263 - GUJARAT HIGH COURT] such duty of central excise if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period, namely, 1- 4-1997. So, next year's profits would get depressed accordingly. Over a period of time, the whole exercise results in evening out; in other words, revenue neutral. At the same time, while disturbing the value of the closing stock the assessing authority cannot change the method of accounting regularly employed. - decided in favour of assessee. Addition on account of the provision of warranty - Held that:- It is a settled principle of law that the provisions created by the assessee on the scientific basis are liable for deduction u/s 37(1) of the Act. In this regard, we find support and guidance from the judgments of Rotork Controls India Pvt. Ltd. vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA] we note that the assessee has created the provision @ 0.4% of the total turnover amounting to ₹ 18,86,570/- (0.4% of ₹ 47,16,42,449/-). On perusal of the ledger of warranty replacing expenses, it was observed that the assessee had incurred actual expenses amounting to ₹ 60,21,216/- only which exceeds the provision created in the books of accounts of the assessee. The fact of actual expenses incurred by the assessee under the head warranty replacing expenses was not doubted by the authorities below. The copy of the ledger warranty replacing expenses is also available on record. Therefore, after considering the facts in totality, we are of the view that the provisions created by the assessee are not ad-hoc provision but based on the scientific basis. We also note that the assessee has been claiming the deduction for the provision of warranty expenses and there was no disallowance made by the AO in the AY 2014-15. It means the AO accepted the provision for the AY 2014-15. These provisions are allowable as deduction u/s 37(1) - Decided against revenue Addition on account of excess depreciation - assessee in respect of certain vehicle purchased before 30.09.2009 claimed depreciation @ 50% on their written down value - Held that:- The exact issue was the subject matter of appeal in AY 2010-11 & 2011-12 as well wherein after a detailed discussion on the definition of commercial vehicles and light motor vehicle, as defined under the Motor Vehicles Act, 1988, decided the issue in favour of the appellant. Since the vehicles under question are the same on which.depreciation has been allowed @ 50% and relying on the judgement of the Hon'ble ITAT in the case of ACIT Vs. Voltamp Transformers Ltd. [2013 (3) TMI 804 - ITAT AHMEDABAD] the depreciation at 50% is allowed and the disallowance of ₹ 3,74,917/- made by the Assessing Officer is deleted. Double deduction - allowability of actual expenses as well as provision for warranty expenses - Held that:- On perusal of the copies of the ledgers filed by the assessee regarding the ledger of warranty expenses, we note that the assessee in one year is creating the provision in the books of accounts which is reversed in the subsequent year by the same amount. Therefore it could not be concluded that the assessee has claiming the double deduction on account of actual expenses as well as provision for warranty expenses. Accordingly, we are of the view that there is no infirmity in the order of Learned CIT(A) hence, the ground of appeal of the revenue is dismissed.
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2019 (2) TMI 331
Disallowance u/s 36(1)(vii) and the other u/s 37 - dis-allowance of bad debts especially when the assessee had not taken any steps to recover the said debts and had merely stated it to be bad debts which were again receivable from a subsidiary company - Held that:- As the words existing prior to 01.04.1989, there as an obligation on the assessee to establish the bad debt claimed for the previous year, whereas by the amendment any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year is eligible for deduction. Hence, the legislature has cautiously left it to the prudence of the assessee to determine whether the debt is bad or not. We see that the Tribunal has looked at the financial figures as available in the previous year of the assessee-company as also the subsidiary company. The subsidiary company was in absolute financial stringency and there was no possibility of any recovery from that company. We do not see any question of law arising from the aforesaid issue, since the Tribunal had looked into the facts and found that the claim of bad debts cannot be said to be one which is made merely for absolving the tax liability. The financial figures on the subject year of the assessee-company and the subsidiary company commend such declaration of bad debts. We also do not agree with the AO's finding that the advance amounts was in pursuance of a financial transaction. The assessee had made the advance to the subsidiary company for execution of job works, which is permissible under Section 37. - Decided in favour of the assessee
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2019 (2) TMI 326
Mandation of linkage of PAN with Aadhar - Permission to file Income Tax returns without complying with the condition of providing Aadhar Card registration number or Aadhar Card Enrolment number - Held that:- As upheld the vires of section 139AA of the Income Tax Act linkage of PAN with Aadhar is mandatory. Insofar as assessment year 2018-19 is concerned, learned counsel appearing for the respondents informs that the respondents had filed the income tax returns in terms of the orders of the High Court and the assessment has also been completed. We therefore make it clear that for the assessment year 2019-20, the income tax return shall be filed in terms of the judgment passed by this Court.
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2019 (2) TMI 325
Validity of reopening of assessment - notice against non existent entity / amalgamated company - eligibility of reasons to believe - notice not addressed in the correct name - Held that:- In the present case, it has been submitted that, as a matter of fact, the draft assessment order and the final assessment order make a clear reference to the fact that M/s. Suzuki Powertrain India Ltd. amalgamated with M/s. Maruti Suzuki India Ltd. Moreover, it has been urged that there was no prejudice to the assessee since it was evident to it at all times that the assessment which was carried out was with respect to the erstwhile business of M/s. Suzuki Powertrain India Ltd., which has been amalgamated with the successor company. In view of the above submissions, we direct that notice shall issue. See SKY LIGHT HOSPITALITY LLP VERSUS ACIT [2018 (2) TMI 1093 - DELHI HIGH COURT]
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2019 (2) TMI 324
Waiver of the loan liability - Capital receipt or Revenue receipt - applicability of 41(1) - Held that:- Not only there is no tax effect, the matter is also covered against the petitioners as per the Judgment of this Court in the case of Commissioner vs. Mahindra and Mahindra Ltd.[2018 (5) TMI 358 - SUPREME COURT]. SLP dismissed.
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2019 (2) TMI 323
Rectification of mistake - impact of subsequent decision passed by the High court after the order of assessment - The question as to whether blending of tea is production or manufacture is debatable. - Held that:- The assessment orders were passed subsequent to the law being settled in Apeejay [1991 (9) TMI 6 - CALCUTTA HIGH COURT]. The assessment orders are not prior to Apeejay (supra) so as to attract the ratio of Geo Miller & Co. Ltd. [2003 (2) TMI 38 - CALCUTTA HIGH COURT]. Tara Agencies [2007 (7) TMI 4 - SUPREME COURT OF INDIA] has held that, processing of tea would fall short of either manufacturing or production. Purtabpore Co. Ltd. [1985 (7) TMI 49 - CALCUTTA HIGH COURT] has held that, a rectification under Section 154 of the Act of 1961 is permissible in order to bring the order of assessment in terms of an authoritative pronouncement of the Court. The Income Tax authorities are preparing to bring the orders of assessment in time with the ratio of Apeejay through the process initiated by the impugned show cause notices. They are entitled to do so. Section 154 can be invoked to correct an error apparent on the face of the record. An order of assessment must be in tune with the law laid down by a binding precedent. The subject orders of assessment not being in terms of the ratio of Apeejay (supra) contains errors. An error in an order not in consonance with a binding precedent is an error apparent on the face of the record.
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2019 (2) TMI 322
Disallowance of deduction u/s 80-IC - a new industrial unit at Selaqui, Uttrakhand had started during the assessment year - A.O. was not satisfied with the declarations and was of the view that having regard to the value of the machinery, that previously used machinery for any purpose is more than 20% of the value of the plant and machinery used in the new unit, the assessee has failed to satisfy the conditions laid down in Section 80-IC(4)(ii) - as per ITAT new plant and machinery, even if assumed to be transferred by the assessee from Kala Amb unit to Selaqui unit, it was never put to use to carry out the manufacturing activities to qualify for exemption u/s 80-IC - Held that:- Under Section 260A, this Court is to frame substantial questions of law wherever they do arise. Though the findings of facts by the AO were reversed by the CIT(A), and in turn were set aside by the ITAT, that ipso facto does not attract the jurisdiction of this Court unless the reasoning or the approach of the ITAT is so unreasonable or manifestly irrational. The ITAT in its remit is the final tribunal of fact. In this case, the court is of the opinion that the ITAT performed the task to the extent it could, having regard to the materials which it elaborately and exhaustively analyzed. The inference it drew cannot be called perverse or illegal. No substantial question of law arises.
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2019 (2) TMI 321
Estimation of cost of kernels - AO estimated it at ₹ 14/- per pound adding the value of the container - assessee's specific case is that the value of the container was included in the cost per pound of the kernels - percentage of dry-age claimed by the assessee @ 10%, while AO allowed it only at 5% - Held that:- The assessee's specific case that the value of the container was included in the cost per pound of the kernels was accepted by the Tribunal, which is challenged by the revenue. As to the percentage of dry-age claimed by the assessee Tribunal found that there was absolutely no material to so reduce the dry-age as claimed by the assessee. The Tribunal looked at the quantitative assessments for the earlier years and found it to be varying between 7.5% and 10%. In such circumstances, the Tribunal directed allowance of the dry-age to be granted at 7.5%. Unaccounted sales estimation the same was on the basis of the purchases made and the sales revealed in the accounts. The Tribunal computed it on the basis of bags of goods, as admitted by the assessee, an apt exercise at the hands of the last fact finding authority. In computation, in fact, the Tribunal allowed only 5% dry-age. The Tribunal found the total unaccounted sales coming to only a value of ₹ 7,38,400/-. The additional ground was allowed to that extent reducing it to what was found by the Tribunal. No substantial question of law.
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2019 (2) TMI 320
Nature of expenditure - revenue or capital - submitting a tender for the purpose of construction, equipping, operation and maintenance of two berths on Build, Operate and Transport (BOT) basis in the Vaizag Port - expenditure being 'once for all' - test of 'enduring benefit' - Held that:- Assessee as engaged in Port related activities and had also carried out constructions in Ports and the submission of tender for a BOT project for the Vaizag Port was a related activity. The project did not take off and as held by the Supreme Court in ALEMBIC CHEMICAL WORKS COMPANY LIMITED [1989 (3) TMI 5 - SUPREME COURT] on the facts in this case there was no enduring benefit obtained by the assessee. It broke down when the Government of India cancelled the tender. We do not find any question of law arising, since the facts have been gone into by the Tribunal and held in favour of the assessee.
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Customs
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2019 (2) TMI 319
Valuation of imported goods - Hot Rolled Coils (HR Coils) - enhancement of declared value based on contemporaneous imports - applicability of Rule 12 of the Customs Valuation Rules, 2007 - Held that:- As per Clause (iii) of explanation under Rule 12, if contemporary import of identical or similar goods is noticed at the higher price, invoice value can be rejected and same can be determined under Rule 5 to 9 of the Rules. The said rule 12 ibid provide for proper officer seeking clarification from the importer to provide further information to satisfy the correctness of the declared assessable value. In the present case, the respondents did submit the invoice, irrecoverable LC and supporting contract documents with reference to the impugned consignments. Nothing more is required with the importer to further substantiate the value. Merely because the assessee failed to submit any payment certificate or Bill of Exchange, the Assessing officer rejected the value declared by the respondent/assessee - The Assessing officer has to give valid reasons in order to reject the declared value and thereafter to proceed with the re-assessment, after due enhancement. Explanation (1)(i)(iii)(a) in Rule 12 appears to have applied by the adjudicating authority in the present case. HR Coil and HR Steel Plates cannot be said to be similar or identical goods. If the revenue is rejecting the value declared by the respondent, then they are bound to prove beyond reasonable doubt that the goods compared with are similar goods or identical goods - HR Coils and HR Plates cannot be termed as one and the same for the purpose of contemporaneous value. Both the goods are different in nature and therefore the values relied upon by the Department for enhancement of declared value is not legally sustainable. The Adjudicating Authority has erred in rejecting the declared price/transaction value of the goods imported by the respondent by taking recourse to Rule 12 of Customs Valuation Rules, 2007. Section 14 of Customs Act, 1962 as well as Custom Valuation Rules, 2007 do not sanction such a method, as adopted by the Adjudicating Authority, for redetermination of assessable value - appeal dismissed - decided against Revenue.
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2019 (2) TMI 318
EPCG Scheme - non-installation of capital goods at the place indicated - N/N. 44/2002-Cus denied - Held that:- It is on record that the imported goods had been deployed at the addresses that were originally, or subsequently by amendment, included in the licenses. It would appear that the facts now established are not in congruity with the facts that guided the adjudicating authority in arriving at his conclusions. That the capital goods were installed, and utilized, at locations which had been, either originally or through amendment, approved by the licensing authority is not in question - Notification no. 44/2002- Cus dated 19th April 2002 is a composite exemption for facilitating an export promotion scheme. That the export obligation in pursuance of the license had been fulfilled is also not in question. The objectives of the notification, and indeed of the export promotion scheme in the Foreign Trade Policy, should prevail over technical irregularities that were repaired in the fullness of time - Visiting detriment of confiscation and penalties under section 111 and 112 of Customs Act, 1964 in the light of such rectification, and compliance with export obligation, would not be appropriate. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2019 (2) TMI 317
Restoration of the name of the Applicant in the Register of Companies maintained by Registrar of Companies, NCT of Delhi & Haryana - Held that:- We have thus tried to call for the records from concerned Government Office’ but could not get the documents regarding compliance under Section 560(1) (2) & (3) of the Old Act. We did not let ourselves to be detained for the purpose as we find that if the documents had been available, it would have been possible for us to see if the Appellants could be said to be negligent. When the same are not available and the consideration under Section 560(6) of the Old Act is relevant for us, basically three parameters remain to be considered if the restoration of name of the Company is to be done. It is clear from the above sub-section 6 of Section 560 that the Company or Member or Creditor, who feels aggrieved, needs to satisfy the Tribunal by showing that: I. The Company was at the time of striking off carrying on business, or, II. the Company at the time of striking off was in operation; or, III. Otherwise, that it is just that the company be restored to the Register. The Appellants want that the pleadings in the petition filed in NCLT with regard to the claims being made that the Company was in operation when it was struck off and that there exist just reasons to restore the name of the Company. We do not have the benefit of observations of the learned NCLT with regard to various documents which have now been filed in appeal as they were not before learned NCLT when the impugned order was passed. It would be appropriate that the matter is remitted back to the learned NCLT for re-hearing. Appeal is allowed - The impugned judgment and order is quashed and set aside. The original Petition is restored to file of National Company Law Tribunal, Delhi - The matter is remitted back to the learned NCLT for re-hearing.
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Insolvency & Bankruptcy
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2019 (2) TMI 316
Initiation of ‘Corporate Insolvency Resolution Process’ against the two ‘Corporate Guarantors’ - ‘Principal Borrower’ is not a ‘Corporate Debtor’ or ‘Corporate Person’ - Section 7 of the ‘I&B Code’ - initiation of the process against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default. Held that:- From clause (h) of Section 5 (8) of the ‘I&B Code’, it is clear that counter-indemnity obligation in respect of a guarantee comes within the meaning of ‘financial debt’ and, therefore, there is no dispute that ‘M/s. Piramal Enterprises Ltd.’ is a ‘Financial Creditor’ of both ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (Corporate Guarantor No.1) and Sunsystem Institute of Information Technology Pvt. Ltd. (Corporate Guarantor No.2). In ‘Ram Bahadur Thakur vs. Sabu Jain Limited [1979 (5) TMI 117 - HIGH COURT OF DELHI], the Hon’ble High Court of Delhi relying on the decision of Hon’ble Supreme Court in ‘Kesoram Mills Case [1965 (11) TMI 41 - SUPREME COURT], held that under the ‘deed of guarantee’ the liability of the company to pay debt arose when the borrower defaulted in making payments and the creditor sent a demand/notice invoking the guarantee. Thus, it is not necessary to initiate ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantors’. Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’. Initiation of the process against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default - Held that:- A ‘Financial Creditor’ has been defined under sub-section (7) of Section 5 means any person to whom a financial debt is owed and ‘financial debt’ is defined in sub-section (8) of Section 5 as a debt which is disbursed against the consideration for the time value of money. Admittedly, for same set of debt, claim cannot be filed by same ‘Financial Creditor’ in two separate ‘Corporate Insolvency Resolution Processes’. If same claim cannot be claimed from ‘Resolution Professionals’ of separate ‘Corporate Insolvency Resolution Processes’, for same claim amount and default, two applications under Section 7 cannot be admitted simultaneously. Once for same claim the ‘Corporate Insolvency Resolution Process’ is initiated against one of the ‘Corporate Debtor’ after such initiation, the ‘Financial Creditor’ cannot trigger ‘Corporate Insolvency Resolution Process’ against the other ‘Corporate Debtor(s)’, for the same claim amount (debt). There is no bar in the ‘I&B Code’ for filing simultaneously two applications under Section 7 against the ‘Principal Borrower’ as well as the Corporate Guarantor(s) or against both the ‘Guarantors’. However, once for same set of claim application under Section 7 filed by the Financial Creditor is admitted against one of the ‘Corporate Debtor’ (Principal Borrower or Corporate Guarantor(s)), second application by the same Financial Creditor for same set of claim and default cannot be admitted against the other ‘Corporate Debtor’ (the Corporate Guarantor(s) or the Principal Borrower). The initiation of the ‘Corporate Insolvency Resolution Process’ initiated under Section 7 of the ‘I&B Code’ against ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (Corporate Guarantor No.2) by impugned order dated 24th May, 2018, is upheld - further, the impugned order dated 31st May, 2018 initiating ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (Corporate Guarantor No. 1) for same very claim/debt is not permissible and the application under Section 7 was not maintainable. Application disposed off.
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Service Tax
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2019 (2) TMI 315
Levy of penalty u/s 78 - Short payment of service tax or not? - the party did not get themeselvwes registered under the category of "real estate agent" services, did not file ST-3 returns and also did not pay the service tax to the Government Exchequer collected by them from their clients from 2006-2007 - Held that:- This Court finds that the Tribunal has recorded a finding of fact that the returns were filed and due taxes have been paid. In case of delayed deposit of tax, interest has also been paid by the respondent-assessee - in view of Master Circular No. 97/8/2007 dated 23.08.2007 read with Circular/Instruction No. F- 137/167/2006-CX .4 dated 03.10.2007, once the taxes have been paid, along with interest, the entire proceedings under the Finance Act, 1994 are concluded. Appeal dismissed - decided against Revenue.
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2019 (2) TMI 314
Classification of service - plumbing services to various builders - period from 2006-07 to 2012-13 - Benefit of abatement - N/N. 01/2006-ST dt. 1.3.2006 - whether the piping system installed in the constructed building by the appellant would be treated as completion and finishing work? - Held that:- Completion of the piping network is mandatory to obtain occupancy certificate of the building. Hence, it cannot be considered as finishing and completion work, in the sense used in the notification number 01/2006 ST dt. 01.3.2006 - Besides, it is also clear when one reads the meaning and scope of completion and finishing service mentioning the activities which are to be considered as completion and finishing work under the scope of commercial or Industrial construction and construction of complex service as defined under Sec.65(25b) and (30a) of the Finance Act,1994, respectively. The Appellant are eligible to the benefit of the N/N. 01/2006 ST Dt.01.3.2006 - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 313
Extended period of limitation - no willful misstatement and suppression of facts - Valuation - the value of the goods were not separately shown by them either in the contract or in the Bills so raised - N/N. 12/2003-ST dated 26.02.2003 - demands stand confirmed by invoking the longer period - Held that:- The appellant were duly registered with the department and were filing the ST-3 returns by showing payment of Service Tax on the value of the services as indicated in the contracts entered by them with the said Public Sector Undertaking. The appellant was entertaining a bona fide belief and there was no mala fide on their part so as to justifiably invoke the longer period of limitation - extended period is not available to the Revenue. However, as a part of demand falls within the limitation period we direct the adjudicating authority to re-quantify the demands against all the appellants for which purpose, the matter is remanded to him - appeal allowed in part - part matter on remand.
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2019 (2) TMI 312
Valuation - maintenance and repair service - inclusion of value of the raw materials/ inputs/items used in providing such services in assessable value - Held that:- The items used in repair activities have already discharged the VAT liability and there is no dispute about the same - Further the Appellate Authority has referred the various decisions including the decision of Hon'ble Allahabad High Court in the case of Balaji Tirupati Enterprises [2014 (1) TMI 404 - ALLAHABAD HIGH COURT] for holding that the value of the items will not be added to the value of services - demand set aside - appeal dismissed - decided against Revenue.
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2019 (2) TMI 311
Nature of Activity - sale or service? - leasing of generator - service of supply of tangible goods - Central Board of Excise and Customs through Circular No.334/1/2008-TRU, dated 29.02.2008 - Held that:- On verification of record and particularly the certificate issued by Chartered Accountant giving details of the registration obtained by the appellant for payment of VAT in respect of right to use of DG sets, it is found that appellants were not covered by the definition of service of supply of tangible goods as clarified by CBEC - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (2) TMI 310
Manufacture - marketability - Exemption to specified goods falling under Chapters 73, 84, 85, 86 and 87 - cast articles of Iron and steel - N/N. 223/1988-C.E. dated 23.06.1988 - denial of benefit on the ground that the castings/cast articles were subjected to boring, welding and gauging, which being applied to transform the rough castings into specific parts having specific dimensions as per the drawings and not merely to remove surface defects or removal of excess material which being not permissible process in terms of the proviso to the Notification. Held that:- The Tribunal glossed over the fact on record that the unit was under Self Removal Procedure (SRP) whereunder it is not mandatory for the department to verify physically each and every article before clearance. It was, therefore, incumbent upon the noticee to have placed for physical verification the impugned article. The Tribunal lost sight of the fact that the Adjudicatory Authority drew an example of Armature Casing and unmachined casting which was placed for verification whereon the benefit of Notification No.223/88 was granted. Tribunal glossed over the aspect that the entire supply was to the Railways of fully machined Railway components/parts and other Railway components/parts from the stage of melting and casting. It was the later components/parts which were found subjected to drilling and welding. The department duly established the twin test of manufacture and marketability . The department having discharged the burden, the onus shifted on the respondent to have contradict that the impugned cast articles which were marketed (to Railways) were not subjected to process of manufacturing. The fact situation in the present case as is evident from cogent material evidence since establishes the fact as to cast articles being subjected to manufacturing process as per drawing and design given by the Railways, the respondent is not benefited by the decision in Vasantham Foundry [1995 (8) TMI 190 - SUPREME COURT OF INDIA], where it was held that `rough unmachined cast iron castings will continue to be treated as declared goods under sub-item (i) of Item (iv) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959. The Tribunal having misread the entire evidence on record committed manifest error in reversing the order passed by the Commissioner, Customs and Central Excise, Indore - appeal allowed - decided in favor of Revenue.
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2019 (2) TMI 309
Rectification of Mistake - Held that:- Since both sides agree that the issue involved in this case has already been resolved by the Larger Bench of this Tribunal in the case of M/s Wipro Ltd. vs. CCE, Bangalore [2018 (4) TMI 149 – CESTAT-Bangalore], I am of the view, that the miscellaneous applications can be considered for hearing of the appeal. Accordingly, miscellaneous applications filed by both sides are allowed - Appeals to come up for final hearing on 18th January, 2019.
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2019 (2) TMI 308
100% EOU - CENVAT Credit of CVD - proper observations not been made - principles of natural justice - Held that:- It is seen that the exact manner in which the admissible credit has been calculated is not specified. In the appeal No. E/554/2010 the figures in the annexure-A to the SCN do not match. In the column of credit availed, the figure shown is 15280 and in the column credit available the figure shown is 150947. Still in the last column it has been stated that there is an excess credit of ₹ 12133/- availed - It is seen that the figures have not been examined by the Order In Original as well as Order In Appeal. The manner in which total duty available has been calculated has also not been specified nor examined by the lower authorities. The credit taken when the credit eligible as per formula without actually specifying how these figures have been arrived at. The actual break up of duty paid in the documents has not been examined - matter requires re-examination. Appeal allowed by way of remand.
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2019 (2) TMI 307
CENVAT Credit - inputs - welding electrodes - Held that:- Reliance placed in the decision of High Court of Rajasthan HINDUSTAN ZINC LTD. VERSUS UNION OF INDIA [2008 (7) TMI 55 - RAJASTHAN HIGH COURT], where it was held that welding electrodes are covered under the definition of capital goods - credit allowed - appeal dismissed - decided against Revenue.
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2019 (2) TMI 306
CENVAT Credit - fictitious invoices - invoices without corresponding procurement of goods described therein - confiscation - applicability of rule 26 of Central Excise Rules, 2002 - Held that:- There is no record of any investigations having been pursued with the recipients on record to ascertain the receipt of the goods at the destination. Also, despite the retraction of the statement of the supervisor that indicted the appellant, the investigation failed to obtain facts that could have corroborated the statement and sustain it even after the person had expired. It is clear from the Rule 26 of CER that confiscability of goods is an essential prerequisite for imposition of penalty. In the instant dispute, there is no allegation that the impugned goods did not come into possession of the appellant. On the contrary, the entire cases been built around the goods not having passed into the possession of the buyers named in the 703 invoices and, therefore, the goods are not offending even if sold to buyers who are not on record - In the absence of any offence in relation to the goods that are alleged to have been not supplied to persons on record, rule 26 cannot be invoked. On this restriction in and non-applicability of, rule 26 of Central Excise Rules, 2002, the impugned order is liable to be set-aside. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 305
Rectification of mistake - decision sought on the basis of records without personal appearance - Held that:- In the application, we find that the order of the Tribunal has not ignored any of them - there is no reason to entertain this application for rectification of mistakes which is, consequently, rejected - ROM application dismissed.
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2019 (2) TMI 304
100% EOU - Demand of duty in respect of raw-material used to manufacture the goods on which duty is duly paid - N/N. 08/1997-CE. Held that:- In case of M/s Sarla Polyester Limited [2007 (11) TMI 47 - CESTAT AHMEDABAD] the facts were similar. There was allegation on M/s Sarla Polyester Limited was that they have cleared goods clandestinely from the 100% EOU, in the instant case the goods have been allegedly removed availing notification which was not available to the appellant. Other than this difference the facts are identical - It was held in the said case that Here duty will be paid on final product so demand on duty free inputs is unjustified. Demand not justified - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 303
Rectification of Mistake - typographical error - The appellant’s name has been shown as M/s Som Products Pvt. Ltd. Whereas the same is M/s Som Pan Products Pvt. Ltd. - in the last paragraph of the order is that the duty stands shown as ₹ 5,74,7,500/- whereas the same is ₹ 5,74,77,500/- - Held that:- As the mistakes are only typographical error, the same is rectified - ROM Application allowed.
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CST, VAT & Sales Tax
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2019 (2) TMI 302
Levy of sales tax - free replacement of defective parts in motor vehicles, during the period of warranty - difference of opinion - Held that:- The issue raised is required to be looked into by a larger Bench. The crucial point which would arise for consideration, and over which the matter needs to be debated, is as to whether, in the case of such a warranty for the supply of free spare parts; once the replacement is made, and the defective part is returned to the manufacturer, sales tax would be payable on such a transaction relating to the spare part, based on a credit note, which may be issued for the said purpose. Matter referred to Larger Bench.
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2019 (2) TMI 301
Levy of tax - maintenance and repair work on the buildings of PWD - payment of wages to the labourers which is pure labour work - Held that:- This Court, at this stage, is not expressing any view on such contention since, the petitioner admittedly, has not filed any reply to the notice of proposal. On the other hand, it is stated that the petitioner personally went and met the Assessing Officer and explained him with details. Needless to say that when a notice of proposal was given in writing, it is for the petitioner to give a reply in writing. In this case, the petitioner has not made any such reply. Imposition of penalty - Assessing Officer has not given an opportunity of personal hearing to the petitioner before imposing such penalty - principles of natural justice - Held that:- It is evident that the Assessing Officer has not indicated any date of personal hearing even in the absence of any reply filed by the petitioner, more particularly, when the Assessing Officer has chosen to impose penalty. At this juncture, it is relevant to refer to a Circular issued by the Revenue in Circular No. 7 of 2014 - it is the duty of the Assessing Officer to provide such personal hearing. In this case, as it has not been done, this Court is inclined to remit the matter back to the Assessing Officer for redoing the assessment, however, subject to the condition that the petitioner shall pay 15% of the tax liability. Petition disposed off by way of remand.
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